What type of analysis allows for adjustments in financial models based on projected changes?

What-if analysis is a powerful tool that enables users to explore the potential outcomes of various hypothetical scenarios by adjusting input variables in financial models. This type of analysis is particularly useful for forecasting and strategic planning, as it allows analysts to see how changes in key assumptions or inputs can impact financial performance.

For instance, a business might want to understand how a proposed increase in sales volume or a change in pricing strategy could influence revenue and expenses. By manipulating these variables, users can generate different projections, assess potential risks, and make more informed decisions based on various scenarios.

In contrast, static analysis refers to examining a fixed set of data without taking into account potential changes or scenarios, while retrospective and historical analyses focus on past performance rather than projecting future possibilities. Thus, what-if analysis stands out as the method specifically designed for evaluating adjustments in response to projected changes.