Sensitivity Analysis in Finance | Calculating Break-Even Point

We learn how to use sensitivity analysis in finance to calculate the break-even point of a business in a variety of different situations. Excel template included!

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In this video we learn about how to analyze businesses, think about different possible break-even situations, and most importantly use sensitivity analysis to zero-in on how we hit our profitability targets.

Knowing how to perform sensitivity analysis in finance roles is one of the things that will differentiate you from other candidates.

First off - what is sensitivity analysis?

This function lets you look at different combinations of variables (say, different prices + return rates, etc) and analyze one particular metric in each situation - in the case of break-even points, that metric is the profit.

But the issue is that looking at each scenario individually (say, $50 price and 30% return rate = $XYZ profit) is extremely slow. You need a way to look at dozens or hundreds of combinations of assumptions in one simple table - that's where sensitivity analysis comes in.

To find this function go to the "Data" tab in Excel, under the "What-If-Analysis" group click "Data Table".

Sections:
0:08 what is sensitivity analysis & what-if-analysis
0:56 understanding the assumptions of our income statement
3:38 situation: investors want us to break even in year 2 or 3
4:01 how to setup sensitivity analysis table (1st table)
7:30 second breakeven point analysis - COGS vs. ad spend (2nd table)
10:50 sensitivity analysis with only one changing variable (3rd table)

By the end of this lesson you will be confident using sensitivity analysis in finance to analyze break even points of businesses.

If you have questions - please leave a comment below and I'll try to help. Cheers!

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Видео Sensitivity Analysis in Finance | Calculating Break-Even Point канала Eric Andrews