Definition Of

Sensitivity analysis

Change of sensitive subjects related with a firm's investment (cash flow, sell-value,sell-advice,demand of products,change of expenditure, etc.) will change  Net Present Value(NPV),the technique to analysis that how much the NPV will change, is Sensitivity Analysis.

According to Besely and Brigham,” Sensitivity analysis is a technique that shows exactly how much the NPV will change in response to a given change in a input variable, other things held constant.”

Share it:

More from this Section

  • Branch Managers
    When banks operate large branch system, many of these functions are supervised by the manager of each branch office.
  • Security Analysts and Traders
    Security analysts and traders are usually found in a bank’s bond department and in its trust department.
  • Scale Economies
    Scale Economies is the reduction in per-unit costs achievable by spreading fixed costs over a higher level of production.
  • Foreign exchange risk or exposure
    Foreign exchange risk or exposure— the likelihood that an unexpected change in exchange rates will alter the home currency value of foreign currency cash ...
  • Normal trade status
    Normal trade status— the term currently used to describe what economists used to call “most-favored nation” status. Normal trade status is the application ...
  • Net Worth
    Net Worth is book value of a company’s common stock, surplus, and retained earnings.
  • Cash Credit (CC)
    Cash Credit (CC) is an arrangement whereby the bank gives a short-term loan against the self-liquidating security.