Sensitivity Analysis is a term that conveys so much meaning it can easily be misunderstood. Most formulations in Excel are in the form of a computational flow from one input cell (or range) to another till we reach one (or more) result or output cells. If we have a portfolio model showing all our investments with their yields, etc, then the amount of investment in each instrument is our input. The total yield in $ is our output or result. We might have another output cell in this case: the effective return on investment (ROI).
Invariably, someone will ask, “what if we invested more in this or that instrument?” Sure, go ahead and do it, but don’t forget to write down the last output value as it will be overwritten by your new scenario. Now the boss pokes his head in the door and says: can you give me a list of the ROI for each of these different amounts? The insensitive brute has just asked for a sensitivity analysis.
So the real question is: how sensitive is my output to my input? In most cases, you would be happy to see a list of all input values next to the resulting output values. In others, you would want a result that measures the sensitivity. Probably a graph between the input and the output might tell you more about sensitivity. For example, if changing the exchange rate does not result in major changes to the ROI, then the ROI is not sensitive to exchange rate changes. Just think of sensitivity as it applies to your friends and you will know what I mean.