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Scenario analysis

Analyzing the overall environment of investment situation without cost or it is a process of analyzing possible future events to scale of risk.

 According to Besely and Brigham,” A scenario analysis is a risk analysis technique in which ‘bad’ and ‘good’ sets of financial circumstances are compared with a most likely situation.”

 According to L.J. Gitman,” Scenario analysis, which is a behavioral approach similar to sensitivity analysis but broader in scope is used to evaluate the impact of various circumstances on the firms return.”

Definition 2.

Scenario analysis— developing plausible representations of a firm’s possible future that make different assumptions about forces driving the market and include different uncertainties.

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