Introduction

BLS E-Services Ltd. engages in the provision of technology enabled digital services. The firm focuses on providing business correspondents services to major banks, assisted e-services, and e-governance services. It offers access points for delivery of public utility services, social welfare schemes, healthcare, financial, educational, agricultural, and banking services to governments and businesses.

Observation

Stock trade all time low breakout last LL wit good volume. On mothly chart stock make a good candlestick pattern. RSI is strong. stock trade above 20 and 50 ema trend is change now from LL, LH to HL.

10-day series (Day 8)

What is sensitivity analysis to assumptions? 🤔

Here is the advance answer with example 👇

Sensitivity Analysis to Assumptions

Sensitivity analysis is a technique used to determine how different values of an independent variable (assumptions) affect a particular dependent variable under a given set of assumptions. It helps assess the impact of changes in key inputs on the outcome of a model or decision.

Example:

Let's consider a company evaluating a new project. The project’s profitability depends on three key assumptions:

1. Sales Volume: Expected to be 10,000 units.
2. Selling Price: Expected to be $50 per unit.
3. Variable Costs: Expected to be $30 per unit.

The company calculates the expected profit as:

• Profit = (Selling Price - Variable Cost) * Sales Volume
• Expected Profit = ($50 - $30) * 10,000 = $200,000

Sensitivity Analysis:

Scenario 1: Change in Sales Volume

• What if sales volume is lower or higher than expected?
  • If sales volume decreases to 8,000 units:
    • New Profit = ($50 - $30) * 8,000 = $160,000
  • If sales volume increases to 12,000 units:
    • New Profit = ($50 - $30) * 12,000 = $240,000

Scenario 2: Change in Selling Price

• What if the selling price changes?
  • If the selling price drops to $45:
    • New Profit = ($45 - $30) * 10,000 = $150,000
  • If the selling price rises to $55:
    • New Profit = ($55 - $30) * 10,000 = $250,000

Scenario 3: Change in Variable Costs

• What if variable costs increase?
  • If variable costs rise to $35:
    • New Profit = ($50 - $35) * 10,000 = $150,000
  • If variable costs decrease to $25:
    • New Profit = ($50 - $25) * 10,000 = $250,000

Summary:

Sensitivity analysis shows how sensitive the profit is to changes in assumptions like sales volume, selling price, and variable costs. By adjusting these inputs, the company can better understand the risk and potential outcomes of the project.

• Example Insight: If sales volume is highly uncertain, this variable might significantly affect profitability, indicating the company should focus on ensuring demand.

Let's touch fundamentals

News of the day

1. Adani Enterprises plans to raise up to 8 billion Indian rupees through the issue of non-convertible bonds, according to an Indian bourse filing on Wednesday.The company's board approved the issuance of debentures with a base size of 4 billion rupees and a greenshoe option of up to 4 billion rupees.The issue will open on Sept. 4 and close on Sept. 17, the filing said.

2. Jio Leasing Services, a wholly-owned subsidiary of Jio Financial Services, has invested 675 million Indian rupees in Reliance International Leasing IFSC, according to a Tuesday filing to the stock exchanges.Reliance International Leasing is a 50:50 joint venture between Jio Leasing Services and Reliance Strategic Business Ventures, a wholly-owned subsidiary of Reliance Industries.The investment, which will fund the business operations of Reliance International Leasing, has been made through the subscription of 8.1% Cumulative Optionally Convertible Preference Shares of 10 rupees each.

3. Aditya Birla Capital has invested 3 billion Indian rupees in its wholly-owned subsidiary Aditya Birla Housing Finance, according to a Tuesday filing to the stock exchanges.The investment was made through the subscription of equity shares of Aditya Birla Housing Finance on rights basis.The housing finance company will use the infused funds to meet its growth and funding requirement, and improve its leverage

Educational content

Wed Aug 28, 2024