Sensitivity Analysis and Scenario Planning (Video) (Course Id 2523)

• Who is this course for?
  This course is for anyone needing Continuing Professional Education (CPE), including CPAs, accountants, and finance professionals seeking to enhance decision-making through analytical tools.

• What is this course about or what problem does this course solve?
  The course addresses how to use sensitivity analysis and scenario planning to improve decision-making by understanding the impact of variable assumptions on financial models and outcomes.

• How can the knowledge from this course be used?
  Participants can apply tools like bookending and tornado diagrams to improve the accuracy of financial estimates and communicate a fuller range of potential business outcomes.

• Why is this course important to a CPA, Accountant, or IRS Enrolled Agent?
  It equips professionals with analytical techniques to better prepare for risks and opportunities, thereby enhancing strategic financial planning and risk management.

• When is this course relevant or timely?
  This course is especially timely when planning under uncertainty or evaluating potential changes in business environments, such as budgeting, forecasting, or risk assessment periods.

• How is a course like this consumed or used?
  The course is delivered as a QAS self-study video with integrated text and includes review and final exam questions, all accessible online without the need for additional materials.

This course will give you insights into how sensitivity analysis and scenario planning can improve your company's decisions. You'll also discover tools to obtain and communicate the insights from this analysis.

Sensitivity analysis is the process of varying inputs to a model to assess their impact on the outcomes (i.e., outputs) of the model. This allows you to identify the model inputs that have the biggest impact on the outputs (e.g., profit). This improves decision efficiency and effectiveness. You also get a clear picture of the company's full range of potential outcomes.

Scenario planning explores projections in which multiple assumptions have been changed from the base case or current conditions. Scenario planning allows outcomes to reflect the correlation of multiple assumptions, which may cause their impact to increase exponentially versus a change by any one of the assumptions. Scenarios can explore opportunities for which the company wants to prepare or risks for which the company should take mitigation steps.

You'll learn tools like bookending and tornado diagrams to develop and communicate sensitivity analysis. Many people anticipate a much too narrow range of potential outcomes. This leaves them blind to many good and bad potential outcomes. You'll discover techniques to improve the accuracy of estimates of the most likely outcome and the range of potential outcomes.

Video - NASBA QAS - Text - NASBA Registry - 2523

Course Learning Objectives

• Recall how to perform sensitivity analysis
• Describe scenario planning
• Identify ways to improve estimates

Chapter 1 - Sensitivity Analysis and Scenario Planning

Chapter 1 Review Questions

Glossary