Sample interview questions: Describe a situation where you had to conduct sensitivity analysis on a financial model to assess the impact of changes in quality-related expenditures.
Sample answer:
Assumptions and Parameters:
- Developed a financial model to evaluate the potential financial impact of varying quality-related expenditures.
- Used historical data, industry benchmarks, and expert judgment to establish initial assumptions and parameters.
Sensitivity Analysis:
- Identified key inputs related to quality-related expenditures, including inspection costs, rework expenses, and warranty claims.
- Tested the model’s sensitivity to changes in these inputs by varying them within reasonable ranges.
- Conducted extensive scenario analysis to simulate different combinations of input changes and observe their impact on financial metrics such as profit, cash flow, and return on investment.
Analysis of Results:
- Examined the direction and magnitude of changes in financial metrics under different scenarios.
- Analyzed sensitivity curves to identify the most impactful inputs and the degree of their influence.
- Assessed the potential financial benefits and risks associated with different leve… Read full answer