Structuring
Sensitivity analysis
Changing one assumption at a time to see which matters most.
Last reviewedWhat does Sensitivity analysis mean?
Sensitivity analysis means changing one input, such as price or market share, while holding the others fixed, and watching how much the answer moves. The inputs that move the answer most are the ones to test hardest. In a case, a line such as "if share is 2% instead of 4%, payback roughly doubles (if cash flow scales with share)" shows good judgment.
Where does it come up in case interview prep?
- Airline unit economics: RASK, CASK, load factor, fuel, and leasingLesson in Airlines, airports, and aircraft leasing
- Six curveballs and how to handle themLesson in Handling ambiguity and curveballs
- Mental math under pressureLesson in Speed and precision
- Bank unit economics: is a loan worth making?Lesson in Retail and commercial banking
- Insurance unit economics: the combined ratio at workLesson in Insurance: life, property and casualty, and health
- Telecom unit economics: fiber roll-out, churn, and capexLesson in Telecom: mobile and fixed networks
- Oil and gas players, trends 2024 to 2026, and how to crack the casesLesson in Oil and gas
- Power players, trends 2024 to 2026, and how to crack the casesLesson in Power, utilities and renewables
Related terms
- HypothesisYour best early guess at the answer, which you then test.
- Net present value (NPV)Today's value of all future cash flows, minus the upfront investment.
- MECEBuckets that do not overlap and together cover everything.
- Issue treeA branching diagram that breaks a problem into smaller parts.
- Driver treeAn issue tree built from the numbers that drive an outcome.
- Pareto principle (80/20)A small share of causes often drives a large share of results.