Are you a Purchasing Psychic, or a Costings Clairvoyant?
Highly skilled budgeters always seem to know how key elements will affect their financial plans in future - but how? Do they polish up the crystal ball, or check their horoscopes? If they're sensible, they probably get Microsoft Excel to do it for them. Here's howâ¦
Projecting future values can be an important part
of your financial decision-making process. It’s often helpful to
project more than one set of values to see how they affect your results.
You can do this easily with "what-if" scenarios — sets
of input values that Microsoft Office Excel 2003 can substitute automatically
in your worksheet.
"What-if" scenarios can help you answer questions such as:
• How would changing my variable cost per unit affect my net
profit?
• What would my estimated capital gain tax liability be if I sold
certain investments?
• How would my loan payments change if I found a lower interest
rate?
You can create and save different scenarios on a worksheet and then
switch between scenarios to view different results.
Try it with a breakeven analysis
To do a breakeven analysis and see how changing the variable cost, fixed
cost, unit sales, or price will affect your profit, you can define different
values for these variables, and then switch between scenarios to compare
the results.
The following illustration shows the current breakeven analysis for
this example.
Breakeven analysis: Current scenario
Create scenarios
1. On the Tools menu in Excel, click Scenarios.
2. Click Add.
3. In the Scenario name box, type a name for the scenario.
4. In the Changing cells box, enter the references for the cells that
you want to change, or hold down CTRL and click each cell.
In this example, to try a scenario of a lower price and projected higher
unit sales, hold down CTRL, and then click cells B2 and B3.
Note To preserve the original values for the changing cells, create
a scenario that uses the original cell values before you create scenarios
that change the values.
5. Under Protection, select the options you want.
6. Click OK.
7. In the Scenario Values dialog box, type the values you want for the
changing cells. For example, for $B$2 (price per unit), type 6.25. For
$B$3 (unit sales), type 110000.
8. To create the scenario, click OK.
9. If you want to create more scenarios, click Add again, and then repeat
the procedure. When you finish creating scenarios, click OK, and then
click Close in the Scenario Manager dialog box.
Display a scenario
1. On the Tools menu, click Scenarios.
2. Select the scenario you want to see, and then click Show.
The values for the scenario are automatically substituted in your worksheet.
Breakeven analysis: Higher price scenario
Create a scenario summary report or PivotTable report
1. On the Tools menu, click Scenarios.
2. Click Summary.
3. Click Scenario summary or Scenario PivotTable.
4. In the Result cells box, enter the references to the cells that contain
values that are changed by the scenarios. In this case, enter $B$8 to
see how the scenarios affect profit. Separate multiple references with
commas.
Note You don't have to specify result cells to generate a scenario summary
report, but you must enter them for a scenario PivotTable report (PivotTable
report: An interactive, crosstabulated Excel report that summarizes
and analyzes data, such as database records, from various sources, including
ones that are external to Excel.).
The scenario summary report displays the variables for each scenario
and the result cells.
Scenario summary report
The PivotTable report displays the result cells for each scenario.
You can use the drop-down arrows to choose the results you want to be
displayed.
PivotTable report
These help sheets are part of the free "Your tools at work" series, which covers packages including Access, PowerPoint and Word. For more on the Your tools at work check out this link.
For help at all levels with Microsoft packages, visit their help pages at www.office.microsoft.com/assistance