Scenario analysis is the process of estimating the expected value of a portfolio after a...

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Accounting

Scenario analysis is the process of estimating the expected value of a portfolio after a given period of time, assuming specific changes in the values of the portfolio's securities or key factors take place, such as a change in the interest rate. Scenario analysis is commonly used to estimate changes to a portfolio's value in response to an unfavorable event and may be used to examine a theoretical worst-case scenario. In this analysis, having complete information regarding the situation and knowledge on the situation is very important which can be provided by the analysis of data which can be facilitated by data analytics. Having tax data mart helps in understanding the limits and benchmarks and also having reference of what is the situation and all the information which helps in efficient analysis of data. By using data analytics and tax data to support scenario analysis, the tax accountant can provide valuable insights and help the company make informed decisions to minimize their tax liabilities. This approach ensures a thorough evaluation of different scenarios and maximizes the potential tax savings while complying with applicable tax regulations. One type of scenario analysis that looks specifically at worst-case scenarios is stress testing. Stress testing is a computer simulation technique used to test the resilience of institutions and investment portfolios against possible future financial situations.

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