What is a sensitivity report?

[Guest]

I will soon be using the sensitivity report in my business management science
class in university and I do not understand my teachers explaination of what
a sensitvity report is. Could anyone possibly explain what it is so that I
will better understand how to use it when the time comes. Thank you.

 

[sulprobil]

A sensitivity gives you an indication of how much a thing
T is dependant on an influence factor F. A sensitivity
report lists the most significant influence factors for a
thing T and how big their influence is (measured by
sensitivities).

Assume you own 1,000 apartments. What will influence your
earnings? The factors are:
1. Occupancy rate
2. Interest rate (if you invest on debt base - that means
you have borrowed money to buy the apartments)
3. Rental rate
A sensitivity report should show you now:
1. Which minimum occupancy rate you need to earn money.
2. Which maximum interest rate you might have to earn
money.
3. At which minimum rental rate you should offer an
apartment to earn money.
And (more advanced): By which factor would your earnings
improve when these influence factors go up/down 1 unit
(percentage or absolute value).

See for example (sensitivity report)
http://www.eloanmasters.com/r_sensitivity_report.htm
and (definition)
http://www.eloanmasters.com/r_sensitivity_report_defined.ht
m

HTH,
sulprobil