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Subject 5. Scenario Analysis PDF Download

Scenario analysis involves constructing various hypothetical scenarios, each with its specific set of assumptions and economic conditions, to understand how changes in variables can affect outcomes.

Generic risk factors affecting all companies include changes in the business cycle, competition, inflation and deflation, and technological developments. Based on a company's risk factors, an analyst may develop several forecast scenarios rather than develop a single forecast. The analyst will judge the likelihood of each scenario occurring.

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