The Difference Between Scenario Analysis and Sensitivity Analysis Is That

question 62

Multiple Choice

The difference between scenario analysis and sensitivity analysis is that

• A) scenario analysis is based upon the IRR and sensitivity analysis is based upon NPV.
• B) only sensitivity analysis allows us to change our estimated inputs of our NPV analysis.
• C) scenario analysis considers the effect on NPV of changing multiple project parameters.
• D) only scenario analysis breaks the NPV calculation into its component assumptions.

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Definitions:

Liabilities

Financial obligations or debts that a company owes to others, which must be paid in the future, such as loans, accounts payable, or mortgages.

Statement of Cash Flows

A financial statement that shows the cash inflows and outflows for a company over a specified period, classified into operating, investing, and financing activities.

Financial Position

The status of the assets, liabilities, and equity of an entity at a given point in time, as outlined on the balance sheet.

Financial Position

A snapshot of the assets, liabilities, and equity of a business at a given point in time, illustrating the company's financial health.