The Purpose of Sensitivity Analysis Is to Show

question 3

Multiple Choice

The purpose of sensitivity analysis is to show:

• A) the optimal level of the capital budget.
• B) how price changes affect break-even volume.
• C) seasonal variation in product demand.
• D) how variables in a project affect profitability.

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Definitions:

Financial Statements

Papers that offer a summary of a corporation's financial status, featuring the balance sheet, income statement, and cash flow statement.

Consolidating

The process of combining financial statements from different entities within a single corporate group to provide a single set of financial statements.

Foreign Subsidiary

A company owned or controlled by another company (the parent company) but located and operating in a foreign country.

Cumulative Translation Adjustment

An entry in the accumulated other comprehensive income section of a translated balance sheet summarizing the gains or losses from currency translation differences.