If you were given today $1,000,000 dollars, what factors would you take into consideration when deciding what to do with that amount of money? First and foremost, you would look for strategies that help maximize return, reduce risk, etc. Your options would be to place that money into a savings account, a CD, buy gold, or invest in the stock market.
Higher returns pose a higher level of risks. Some of the risks would be loss of the investment, high taxation, anxiety that comes with the possibility of losing that money.
By making simulations using What If scenarios you may anticipate some outcomes and predict in advance the possible consequences of your decisions.
Sound investment decisions are based primarily on the potential rate of return that is why when evaluating whether or not to invest the potential rate of return must be carefully analyzed. Just as one would analyze whether or not a required rate of return could be realized a business person would analyze his or her decision of increase prices, eliminate a product, etc.
Most of the decision-analysis tools on the market focus on one specific analytical technique, like simulation or decision trees. They may be tailored to a specific industry need. One integrated set of tools that combines the best analytical methods, can be applied to different problems, and is reasonably priced is Microsoft Excel. By using this tool, accountants add value to their organizations.
The measure of any business intelligence solution is its ability to derive knowledge from data. Business analysis tools such as the one described by Excel in the video attached here, have the capability to identify patterns, trends, and rules and create “what-if” analyses.
Microsoft Education provides a Step-by-step How To:
- Start Microsoft Excel and either open a file that includes some formulas that you would like to test, or start from a new spreadsheet, and then type in your text and formulas.
- Plan how you would like to test different changes to the values in your spreadsheet.
- To create a new scenario, select Scenarios from the Tools menu.
- Click Add.
- In the Scenario name box, type a name for the new scenario.
- In the Changing cells box, enter the references for the cells that you want to change. 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.
- Under Protection, select the options that you want, and then click OK.
- Next, in the Scenario Values dialog box, type the values that you want for the changing cells and then click OK.
- If you want to create additional scenarios, click Add again, and then repeat the steps above. When you finish creating scenarios, click OK, and then click Close in the Scenario Manager dialog box.
- Try out the different scenarios by clicking Scenarios on the Tools menu. See how your spreadsheet changes as you analyze the "what-if" possibilities.
Goal Seek IS an analytical function, which allows a value in a formula to be adjusted in order to reach a desired result or answer. It can eliminate unnecessary calculations. Goal Seek repeatedly tries news values in the variable cell to reflect changes in outcomes.
Clik here to a Microsoft video that teaches how to use What If Scenarios.Just Play Demo. It is worth to follow it along.