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10.5 Sensitivity Analysis
This analysis looks at the effect of price decreases on a business' income and profit indicators. It
is important in competitive industries to be able to lower prices to beat competitors and to attract
customers if necessary.
The analysis will investigate the effect of price decreases of 5% and 10% on MB Tyre Centre's
financial indicators.
Following are tables with results after conducting Sensitivity Analyses on key aspects such as
Debt Service Ability, Current Ratio, Operating Margin and Return on Investment (or Return on
Equity).
Debt Service Ability
After starting the operations, MB Tyre and Auto Centre will be able to cover its
debt service ability as can be seen from the attached financial
Return on Investment (ROE)
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