The technique of sensitivity analysis helps in studying the impact of crucial variables like
raw material, sales volume, sales price, degree of capacity utilization etc. over the economic
viability of an enterprise. Under this approach the value of different key variables is changed in a
systematic manner. In other words, change is effected in one variable and the other variables are
assumed constant and the results are analyzed to find out sensitivity of various variables with
respect to their impact on profit margin.
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