Enter the value of a fixed variable and both the initial and final values of changing variable into the calculator to determine the fixed variable sensitivity.
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Sensitivity Analysis Formula
The following formula is used to calculate a sensitivity analysis.
S = X1/Y1 * Y2
- Where S is the sensitivity (or final value of the fixed variable.)
- X1 is the initial value of the fixed variable
- Y1 is the initial value of the changing variable
- Y2 is the final value of the changing variable
To calculate a sensitivity, divide the initial value of the fixed variables by the initial value of the changing variable, then multiply by the final value of the changing variable.
Sensitivity Analysis Definition
A sensitivity analysis a term used in finance to describe how a particular variable of a business affects another variable over time, such as sales and units sold.
Sensitivity Analysis Example
How to perform a sensitivity analysis?
- First, determine the initial value.
Determine the initial value of the fixed variable.
- Next determine the initial value of the changing variable.
Determine the initial value of the changing variable.
- Next, determine the final value of the changing variable.
Determine the final value of the changing variable.
- Finally, perform the sensitivity analysis.
Calculate the final value of the fixed variable using sensitivity analysis.
A sensitivity analysis is a quantitative analysis used mostly in finance to determine how a value of particular variable changes with respect to another over time. For example, if you have a good you make that you sell for $10, and it sells 1,000 units a month. How much would the units sold change if you changed the price to $20 per month. Using the sensitivity analysis, you would say it’s likely that it sells 500 units.
For single variable relationships, the formula above would be used. For more than one variable, a more complicated formula is needed.