The process of determining the effects of one key variable on the overall outcome of a pro forma income statement,for example,is known as:
A)ratio analysis.
B)scenario analysis.
C)sensitivity analysis.
D)form analysis.

Question

Quizplus · Accepted Answer

Sensitivity analysis is the process of determining the effects of one key variable on the overall outcome of a financial statement, such as a pro forma income statement. It helps in assessing the impact of changes in key assumptions on financial projections and evaluating the risk associated with them. Ratio analysis involves the calculation and interpretation of different financial ratios based on the financial data of a company. Scenario analysis involves creating different scenarios and assessing the impact of each one on the financial outcomes. Form analysis is not a known financial analysis technique.

The Process of Determining the Effects of One Key Variable