Sensitivity Analysis Is Required Because

question 18

Multiple Choice

Sensitivity analysis is required because:

• A) payoffs and probabilities are estimates.
• B) most decisions will affect employees.
• C) expected payoffs are sensitive to the time value of money.
• D) it is the second step in the decision model.
• E) with the passage of time, small decisions get bigger.

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Definitions:

Consignment

A business arrangement where goods are left in the possession of another party to sell, but the owner retains ownership until the goods are sold.

Days' Sales

Refers to the ratio that indicates how many days worth of sales a company has in inventory, providing insight into inventory management efficiency.

Inventory

An accounting term for goods and materials that a business holds for the ultimate goal of resale or repair.

Inventory Turnover

A measure of how frequently a company sells and replaces its stock of goods during a certain period of time, indicating the efficiency of inventory management.