Sensitivity analysis

Financial Analysis in Power BI

Nick Edwards

Capital Markets Analyst

What is sensitivity analysis?

Sensitivity analysis evaluates the performance of a dependent variable given a range of inputs to understand their impact.

Is more open-ended than scenario analysis
The goal is to understand how the dependent variable reacts to a range of input values

¹ https://corporatefinanceinstitute.com/resources/knowledge/modeling/what-is-sensitivity-analysis/

Dependent versus independent

Dependent variables derive their value from the financial model and rely on independent variables.

They are the observed output of the analysis.

Independent variables derive their value from outside of the financial model.

They are the inputs of the analysis.

Example: Which are dependent and which are independent?

Revenue = Gross Sales + (Discount/Premium)

Sensitivity table

A sensitivity table showing the relationship of price on supply and demand. When supply and demand are equal to each other, price is stable at $5. However, when there is a shortage, where demand is greater than supply, prices increase. If there is a surplus where supply is greater than demand, then prices decrease.

Sensitivity table

Let's practice!

Financial Analysis in Power BI