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Sensitivity analysis

Assessing the Influence of Operating Leverage on Financial Risk

November 28, 2023

What impact does Operating Leverage have on a company's financial risk?

Operating leverage directly impacts financial risk, as it increases a company's exposure to sales fluctuations, potentially leading to higher financial instability and default risks, especially if fixed costs are high relative to variable costs.

Tags : Operating Leverage , Financial Risk , Sensitivity Analysis

Assessing Risk Sensitivity in Investment Decisions

December 11, 2023

What is the role of sensitivity analysis in capital budgeting?

Sensitivity analysis evaluates how changes in variables like interest rates, sales volume, or costs impact project outcomes. It aids in assessing project robustness against uncertainties, offering insights into potential risks and guiding decision-making.

Tags : Sensitivity Analysis , Capital Budgeting , Risk Evaluation

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