Techniques of Corporate Financial Management

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Corporate financial management

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Table of Contents
Introduction......................................................................................................................................3
a. Sensitivity analysis.......................................................................................................................3
b. Scenario analysis..........................................................................................................................4
c. Break-even analysis.....................................................................................................................5
d. Simulation analysis......................................................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

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Introduction
Decision making is an important requirement in the business and it is to be completed in an
effective manner. There is the need to use various techniques which are available in this process
so that the best decision can be made. The business will be making improvements with the help
of the decisions and therefore they are required to be made in the best manner. The main
techniques which can be used are scenario analysis, breakeven analysis, sensitivity analysis, and
simulation. They are required to be understood in the proper manner and for that an
understanding of them is provided in the report below in a detailed manner.
a. Sensitivity analysis
Capital budgeting is the technique with the help of which all of the important investment which
is required to be made will be analyzed and evaluated. There are several aspects which need to
be covered before making any of the investments by the company. There is the risk and return
which is involved in any project and before making of decision they shall be considered so that
the one which will be proving the company with the best results will be selected (Herman and
Usher, 2017). There is a difference in the results which are expected by the company and the
ones which are attained actually by the company. All of the variances which are available will
have to be identified and with that the reason for the change shall also be identified. In case of
the high variance there will be involvement of the risk which shall be avoided. For this the
sensitivity analysis is performed in which the impact of the change in the variable on the results
of the project is analyzed. The net present value at the different variables will be analyzed and
then the decision will be made accordingly.
This will be helping in making the evaluation of the project and by that, the decision for the
selection of the best project will be made. All of the aspects in relation to the project will be
identified and then the risk which will have to be borne by that will also be taken into account.
The comparison among all the available projects will be made and the factors which are leading
to the adverse impacts will be also be identified (Baio and Dawid, 2015). The main motive of the
business is to earn higher returns and so the company will be choosing the project which will be
provided with the best profits. There will be undertaking of the proper process for the sensitivity