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In Business / High School | 2025-07-08

Question 9 The process of estimating profits under different scenarios is called: (A) Regression (B) Scenario analysis (C) Clustering (D) Multiplier effect

Asked by Emieloy5759

Answer (1)

The process of estimating profits under different scenarios is called Scenario analysis .
Scenario analysis is a strategic planning technique used in business to make informed decisions by evaluating potential future events by considering alternative possible outcomes (or scenarios). It helps businesses prepare for uncertainty by analyzing the impact of possible risks and opportunities on their operations and finances.

What : Scenario analysis involves creating different 'scenarios' or models to estimate how future events might impact a business’s financial performance. Businesses might consider best-case scenarios, worst-case scenarios, and most likely scenarios to cover a range of possibilities.

Why : By understanding potential risks and their impacts, businesses can better prepare and adapt their strategies to achieve more stable profits. It aids in risk management and strategic planning.

How : To conduct scenario analysis, businesses identify key variables or factors that could impact profits, such as changes in market demand, economic conditions, or regulatory changes. They then create models to simulate how changes in these variables might affect their profitability.

Where : This technique is commonly used in financial planning, investment analysis, and project management.

Who : Typically, financial analysts, strategic planners, and managers within a company conduct scenario analysis.


The correct multiple-choice option is (B) Scenario analysis .

Answered by LucasMatthewHarris | 2025-07-21

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