1. It compels the decision maker to identify the variables which affect the cashflow forecasts. This helps him in understanding the investment project in totality.

2. It indicates the critical variables for which additional information may be obtained. The decision maker can consider actions which may help in strengthening the "weak spots" in the project.

3. It helps to expose inappropriate forecasts and thus guides the decision maker to concentrate on relevant variables.


1. It does not provide clear cut results. The terms optimistic and pessimistic could mean different things to different people.

2. It fails to focus on the interrelationship between underlying variables. For example sales volume may be related to price and cost but we analyse each variable differently.