Session Learning Objectives
Why Scenario & Sensitivity Analysis?
Your three-statement model produces a single set of outputs based on one set of assumptions. But the real world is uncertain — revenue might miss targets, margins could compress, or interest rates could spike. Scenario & Sensitivity Analysis lets you answer the critical question:
"What happens to our valuation if our assumptions are wrong?"
Bull Case
Optimistic assumptions — what if everything goes right?
Base Case
Most likely scenario — management's best estimate
Bear Case
Pessimistic assumptions — what if things go wrong?
Session Sections
Scenario & Sensitivity Fundamentals
Understanding the difference between sensitivity, scenario, and simulation analysis
- Sensitivity vs. scenario vs. simulation
- Key drivers identification
- The CHOOSE function approach
Excel Data Tables
Building one-variable and two-variable data tables for sensitivity analysis
- One-variable data tables
- Two-variable data tables
- Practical examples with revenue & margins
Scenario Manager & Switches
Building bull/base/bear cases using Excel's Scenario Manager and input switches
- Excel Scenario Manager (What-If Analysis)
- CHOOSE-based scenario switches
- Building a 3-case output summary
Goal Seek & Solver
Reverse-engineering your model — finding the inputs needed for a target output
- Goal Seek for break-even analysis
- Solver for multi-variable optimization
- Practical applications
Building a Sensitivity Dashboard
Tornado charts, heat maps, and presenting sensitivity results professionally
- Tornado chart construction
- Conditional formatting heat maps
- Executive summary presentation
Reading & Practice Materials
📚 Required Reading
- Excel 2019 Bible, Ch. 12 (What-If Analysis)
- Pignataro, Ch. 6 (Sensitivity Analysis)
This session builds directly on Session 8: Three-Statement Integration. You need a working, balanced three-statement model before performing scenario and sensitivity analysis. Make sure your model from Session 8 is complete and all balance checks pass.