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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Bpp exam kits number 26 (c),
See Bpp exam kits number 26 (c), see its answers part c I am not understanding the part of sensitivity analysis and the simulation???
Please can you give me another answer for these two???
PLEASE REPLY
If something is uncertain, then if the actual figure is different from what has been estimated, then the final decision might be different.
Sensitivity measures what percentage change we can afford before reaching breakeven.
Here is a simple example:
If one year we have revenue of 20 and costs of 12, then there is a profit of 8. If the revenue is uncertain, then we still will get a profit provided that the revenue is more than 12, but we will make a loss of revenue is less that 12. So….we can afford the revenue to fall by 8 before we make a loss. In percentage terms this is a fall of 8/20*100 = 40%
John can u please explain me for simulation also and give me a simple example of this??? Please reply