In this video, the instructor performs scenario analysis and stress testing of results.
- [Instructor] Now that we've built…our hedonic pricing model, we want to go through…and we want to stress test it…to determine how different changes…in our business practices will impact our sales.…In particular, Dianne is interested…in looking at how a change in price,…and by extension a change in the net promoter score,…will impact sales at the firm.…I'm in the 04_03 folder looking…at the begin financial data file.…
Now as you can see, we've built a model…which shows us that given these particular inputs,…our expected output for sales is $751.53 million.…So I'm going to create a little chart down here…that shows us what our sales are…under a variety of scenarios.…So our base case is 751.5 million.…Now, Dianne is recommending that the firm lower their price.…
Doing that, she believes, will raise the net promoter score…from 0.001 to 0.04.…As we can see with the bolded number at the top,…doing that results in the firm's sales rising…to $816.8 million.…If we lower the price, that's the expected impact on sales.…Now we might ask, well that sounds great,…
Join Professor Michael McDonald and discover how to use predictive analytics to forecast key performance indicators of interest, such as quarterly sales, projected cash flow, or even optimized product pricing. All you need is Microsoft Excel. Michael uses the built-in formulas, functions, and calculations to perform regression analysis, calculate confidence intervals, and stress test your results. You'll walk away from the course able to immediately begin creating forecasts for your own business needs.
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- List the two methods of making decisions.
- Identify the most common method of conventional financial forecasting.
- Describe common challenges that come when trying to merge data.
- Assess the types of questions that business intelligence is best suited to answer.
- Distinguish the statistic that is most useful for estimating the impact of an X variable on a Y variable.