Q: In the model below, Amy used sensitivity analysis in a cashflow projection to check how her assumptions affect her need to finance operations through credit or loans during the coming year.
This question has two parts. First, think about which one outcome variable is most clearly related to the need to plan for financing operations. Then identify which assumption she should make sure she has estimated correctly, since the outcome variable is most sensitive to changes in that assumption. The range B4:F6 show current best assumptions. Range B8:F18 show 10% changes in the three assumptions. Provide as your answer the assumption variable you’ve identified.
or
Q: Amy employed sensitivity analysis in a cashflow forecast in the model below to examine the impact of her assumptions on her requirement to fund operations through loans or credit in the upcoming year.
There are two components to this question. First, consider which one of the result variables most obviously relates to the requirement for operating budget planning. Then, as the result variable is most sensitive to changes in that assumption, choose which assumption she should confirm she has approximated accurately. The range B4:F6 displays the most recent best guesses. The three assumptions alter by 10% in ranges B8–F18. Provide as your answer the assumption variable you’ve identified.
- Return rate
- All of these are true
- Unit price
- Advertising budget
- Margin
Explanation: Among these options, Unit Price is likely the assumption that Amy should estimate correctly, as it has a direct impact on revenue, which in turn influences cash flow and the need for financing operations.
