Sensitivity Analysis

question 75

Multiple Choice

Sensitivity analysis:

• A) makes most sense when variables are interrelated.
• B) gives an idea of the combined effect of pessimistic outcomes.
• C) allows the manager to weight the various outcomes to provide a better estimate of NPV.
• D) forces the manager to identify the underlying factors.

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Definitions:

Payout

The process of distributing funds by foundations and trusts to meet legal requirements or fulfill their mission.

Accrual Basis

An accounting method where revenue and expenses are recorded when earned or incurred, regardless of when cash transactions occur.

Expenditures

The action of spending funds or an amount of money spent on a particular purpose, product, or service.

Long-Term Solvency

The ability of an organization or business to meet its long-term financial obligations and continue operations into the future.