Sensitivity analysis is used as part of financial modelling. It is primarily used to study the impact of changes in different independent variables on a dependent variable, basis certain assumptions. It uses 'what if' questions to analyse how multiple sources of uncertainty can impact a company's performance forecast.
For example, a company can study the potential revenue increases from an investment in a technological resource. This can be done by modifying the demand levels of the final product/service, performance downtime range, service cost, etc. As another example, suppose a company is trying to estimate the range of profits from a prospective patent purchase. While the patented product is relatively new, there are chances that a more advanced product enters the market. This could reduce the company's targetted sales. Accordingly, the company carries out a sensitivity analysis to gauge the investment's lifetime profitability by assuming certain sales levels in case the advanced product does not capture market share.