The Purpose of Sensitivity Analysis Is to Show

question 45

Multiple Choice

The purpose of sensitivity analysis is to show:

• A) the optimal level of capital expenditures.
• 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:

Accounting Standards

Formal guidelines and principles designed to improve the transparency and consistency of financial reporting and accounting practices.

Financial Statements

Financial statements are formal records of an entity's financial activities and position, including the balance sheet, income statement, and cash flow statement.

FASB

The Financial Accounting Standards Board, an organization responsible for establishing accounting and financial reporting standards in the United States.

Single-Entry Accounting

An accounting system in which the flow of income and expenses is recorded in a running log, basically like a checkbook.