Qmb 4700 Test 1 Set 5

Front 1

five categories of spreadsheet analysis

Back 1

Base-case analysis
What-if analysis
Breakeven analysis
Optimization analysis
Risk analysis

Front 2

can describe current policy, most likely scenario, best or worst case scenarios

Back 2

base case

Front 3

Answers questions such as:
If we follow last year’s plan, how much profit should we expect next year?
How many items do we expect to sell next week?

Back 3

base case analysis

Front 4

Analyzes how output changes with changes in inputs
You can vary a parameter, a decision variable, or the model structure
Also called sensitivity analysis
Generates intuition about the model
Part of debugging process

Back 4

what if analysis

Front 5

analyzes how output changes with changes in inputs.

Back 5

what if analysis

Front 6

can vary a parameter, a decision variable or the model structure

Back 6

what if analyis

Front 7

also called a sensitivity analysis

Back 7

what if analysis

Front 8

generates intuition about the model, part of debugging process

Back 8

what if analysis

Front 9

Ask: what if “given” information were different
Tests: robustness of model
e.g., how much will our answer change if our product costs turn out to be

Back 9

varying a parameter

Front 10

Explores that which we can influence

Leads us to better decisions
e.g., how much will profit change if we spend an extra $1,000 on advertising in the first quarter?

Logically related to optimization analysis

Back 10

varying a decision variable

Front 11

logically related to optimization analysis

Back 11

varying a decision variable

Front 12

Tests key structural assumptions in model

Harder to test than changes to parameters or decision variables
e.g., how does profit change if we change our linear model of price and demand to a non-linear one?

Back 12

varying the model structure

Front 13

Record base-case to compare to results of what-if analysis

Back 13

benchmarking

Front 14

Sets of parameter values often go together

Back 14

scenarios

Front 15

a set of parameter values that are internally consistent

Back 15

scenario

Front 16

How sensitive is the predicted outcome to changes in a fixed parameter?

How sensitive is the predicted outcome to simultaneous changes to two fixed parameters?

A table of outcome values based on varying inputs helps answer these questions

Back 16

data sensitivity

Front 17

Compares the sensitivity of the outcome to each of the fixed inputs

I can vary each input parameter by +10% and then by -10% and see the result on the output

Back 17

tornado chart

Front 18

The value of an input that creates exactly $0 in outcome
Answers questions such as:
How high does our market share need to be before we turn a profit?
How high would the discount rate have to be in order for this project to have a NPV of zero?
How low must labor costs be to break even?
Excel Goal Seek is a useful tool

Back 18

breakeven analysis

Front 19

Finds the decision variable values that achieve the best possible value of an output
You can use trial and error, typing in different values of the decision variables
Excel Solver is an important tool

Back 19

optimization analysis

Front 20

Analyzes the effect of uncertainty on the output

Some inputs are random not fixed

You can apply a probability model to some inputs: Rate of return might average 10% but have a standard deviation of 1%

Back 20

simulation: risk analyis