What-if analysis
What-if analysis explores how model outputs change when specified inputs or assumptions are changed. It can test one input at a time or combine changes in a coherent scenario. State the baseline, alternatives and relationships among assumptions, then interpret results with model and data limitations. Sensitivity analysis is one related way of examining input changes; changing a model input does not establish that the scenario will occur or that the relationship is causal.
Worked example
A model forecasts revenue of 1,000 units × $10 = $10,000 and total cost of $7,000, giving $3,000 profit. In an alternative with the same unit sales, $11 price and $7,500 cost, modelled profit is $3,500: a $500 increase under those assumptions.
Common mistake
Calling an assumed scenario a prediction or changing related inputs inconsistently while treating the result as a realistic outcome.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | PM | Supporting | September 2026–June 2027 |