Define sensitivity analysis

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter12: Balanced Scorecard And Other Performance Measures
Section: Chapter Questions
Problem 10Q: What are the six characteristics of a good performance measurement system?
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Define sensitivity analysis

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Sensitivity Analysis:

The process to evaluate the effect of change in one variable on the end result of a project is called sensitivity analysis. It reflects the change in net present value with respect to change in an input unit with other variables remain constant.

Uses of Sensitivity Analysis:

Sensitivity analysis is used to know the effect of any possible change on the end result. So, the input used is changed and the analysis will show the updated result.

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