Which drivers are typically tested in sensitivity analyses for a financial model?

• A. Revenue growth, gross margin, OPEX rate, capex, tax rate, discount rate, and working-capital assumptions.
• B. Only revenue growth.
• C. Depreciation methods and amortization schedule.
• D. Macroeconomic indicators.

Answer: (A)

Sensitivity analysis examines how changes in the most influential inputs ripple through the forecast to affect outputs like cash flow and value. The best set of drivers to test includes revenue growth, gross margin, OPEX rate, capex, tax rate, discount rate, and working-capital assumptions. These are the levers that directly alter future cash inflows, costs, capital needs, and the timing of cash flows. If revenue grows or shrinks, the scale of inflows changes; margins and operating costs determine profitability; capex drives capital needs and depreciation; tax rate changes affect after-tax cash; the discount rate changes how future cash is valued; and working capital assumptions influence cash availability and liquidity. Other options either focus on narrower aspects (like only revenue growth) or on accounting methods (like depreciation schedules) or external indicators, which are not as representative of the typical set of sensitivities used to probe a financial model’s core cash-flow and valuation dynamics.