Question

What is the advantage of performing sensitivity analysis along with breakeven analysis?

Answer 1

Breakeven analysis how many units or what amount of revenue will be required to arrive at a no profit/ no loss situation. Sensitivity analysis is how the profits might change if one of the variable factors change . The variable factors can be the units sold, selling price, the variable price of goods sold etc.

Conducting a sensitivity analysis is extremely important as it helps to find out how the profitability of the venture will be affected if the busines scenario or external conditions change.