Using what if analysis in excel

Create Different Scenarios | Scenario Summary | Goal Seek

What-If Analysis in Excel allows you to try out different values (scenarios) for formulas. The following example helps you master what-if analysis quickly and easily.

Assume you own a book store and have 100 books in storage. You sell a certain % for the highest price of $50 and a certain % for the lower price of $20.

If you sell 60% for the highest price, cell D10 calculates a total profit of 60 * $50 + 40 * $20 = $3800.

Create Different Scenarios

But what if you sell 70% for the highest price? And what if you sell 80% for the highest price? Or 90%, or even 100%? Each different percentage is a different scenario. You can use the Scenario Manager to create these scenarios.

Note: You can simply type in a different percentage into cell C4 to see the corresponding result of a scenario in cell D10. However, what-if analysis enables you to easily compare the results of different scenarios. Read on.

1. On the Data tab, in the Forecast group, click What-If Analysis.

2. Click Scenario Manager.

The Scenario Manager dialog box appears.

3. Add a scenario by clicking on Add.

4. Type a name (60% highest), select cell C4 (% sold for the highest price) for the Changing cells and click on OK.

5. Enter the corresponding value 0.6 and click on OK again.

6. Next, add 4 other scenarios (70%, 80%, 90% and 100%).

Finally, your Scenario Manager should be consistent with the picture below:

Note: to see the result of a scenario, select the scenario and click on the Show button. Excel will change the value of cell C4 accordingly for you to see the corresponding result on the sheet.

Scenario Summary

To easily compare the results of these scenarios, execute the following steps.

1. Click the Summary button in the Scenario Manager.

2. Next, select cell D10 (total profit) for the result cell and click on OK.

Result:

Conclusion: if you sell 70% for the highest price, you obtain a total profit of $4100, if you sell 80% for the highest price, you obtain a total profit of $4400, etc. That’s how easy what-if analysis in Excel can be.

Goal Seek

What if you want to know how many books you need to sell for the highest price, to obtain a total profit of exactly $4700? You can use Excel’s Goal Seek feature to find the answer.

1. On the Data tab, in the Forecast group, click What-If Analysis.

2. Click Goal Seek.

The Goal Seek dialog box appears.

3. Select cell D10.

4. Click in the ‘To value’ box and type 4700.

5. Click in the ‘By changing cell’ box and select cell C4.

6. Click OK.

Result. You need to sell 90% of the books for the highest price to obtain a total profit of exactly $4700.

Note: visit our page about Goal Seek for more examples and tips.

What-if-analysis in Excel is a tool in Excel that helps you run reverse calculations, sensitivity analysis and scenarios comparison.

Decision making is a crucial part of any business or job role. When you can take decisions, which are informed based on data, the outcome of the business or project or task is always more in control.

Thus, What if Excel is used by almost every data analyst and especially middle to higher management professionals, to make better, faster and more accurate decisions based on data.

3 parts of what-if-analysis in Excel

• Goal Seek – Reverse calculations
• Data Table – Sensitivity analysis
• Scenario Manager – Comparison of scenarios

Goal Seek in What if analysis

Let’s consider a simple dataset, where the invoice amount is Rs. 10,000, on which there is 9% CGST and 9% SGST, which thus amounts to a total of Rs. 11,800.

The customer asks you for a discount of Rs. 800 and thus the final amount should be Rs. 11,000.

Now, the equation in simple terms is, X + 18% = 11000, where X is the invoice amount, 18% is the total GST.

To find out, how much + 18% = 11000, we will use Goal Seek in What if analysis.

• Place your cursor on the ‘Total’ cell
• Under the ‘Data’ tab, click on ‘What-If-Analysis’, then on ‘Goal Seek’

• In ‘Set Cell’, B4 will automatically be selected as you had kept your cursor on it.
• In ‘To value’, enter the desired value, 11000 in this case.
• In ‘By changing cell’, choose the value that needs to be changed, invoice amount in this case. Thus cell B1 is selected.
• Press Ok

Excel will reverse calculate and immediately give you the value Rs. 9,322, which + 18% equals exactly to Rs. 11,000

This was a very simple example of using Goal Seek in what-if analysis. You can use Goal Seek even for more complex models, let’s take an example of a Car loan model.

The ‘EMI’ calculated Rs. 19,786 is the outgoing amount per month. The value is negative as money is going out of your pocket.

But, you have a budget of only Rs. 17,000 per month. So, how much can you afford as ‘Price of Car’?

Put the Goal Seek values as above and you will know the Price of Car that you can afford.

This was calculations at multiple levels that Goal Seek in What-if analysis did, as it had to consider Available funds, ROI, Number of payments to reverse calculate and give you the answer.

That’s how powerful it is.

Data Table in What-If analysis

Data Table is used for Sensitivity analysis. What this means is basically, either 1 or 2 of the inputs in your model are changing, you want to know output based on each change.

Let’s take the same Car loan example as earlier.

Now, after applying the Goal Seek, you know you can afford to buy a car worth Rs. 7,15,526 instead of Rs. 8,00,000.

1-input Data Table

Then you go to the Car showrooms and research on more cars available. You find out 5 cars that you like, you want to know what would be the EMI amount for each of the car?

Car 1 – Rs. 5,54,000

Car 2 – Rs. 5,96,000

Car 3 – Rs. 6,24,000

Car 4 – Rs. 7,36,000

Car 5 – Rs. 7,94,000

Use what if analysis data table to find this.

Since only 1 input is changing, that is, Price of Car, we will use 1-input data table.

Make this structure in your Excel sheet next to your model.

In D3, you can write anything you want, doesn’t matter.

Next to that, in E4, put =B9. Basically, you are pointing to the formula that is used to calculate the EMI. Thus, here you have informed Excel that you want to calculate the resulting EMI for each value, using the formula in B9.

Now select this structure you have created and go to ‘Data table’ under what-if analysis in Data tab.

Since our options of Prices of Cars are put vertically in a column, we will use Column input cell. Select cell B1 to inform Excel that the 5 values are Price of Car values.

Press OK

Excel has calculated for you, the EMI for each change in Price of Car.

2-input Data Table

Similarly, you can have 2 inputs varying and still get the respective outputs.

So now you think about what if I change the duration of the loan, and compare for all these 5 cars?

Go to Data Table and select Row input cell as ‘No. of payments in months’ and Column input cell as ‘Price of car’

You will get the EMI amount for each combination in no time, without much effort or any complicated formulas.

Scenario Manager in what if analysis

Let’s say you are working in a Car Showroom in the Sales department. You have been given the task to plan the sales for the next quarter. You must build multiple scenarios and prepare a comparison of all the scenarios.

You make a model as below and then want to create multiple scenarios based on number of cars that you will be able to sell for each of the cars.

Under What-if analysis, go to scenario manager.

Click on ‘Add’

Let’s start building our 1^st scenario

• Scenario Name – Best Case
• Changing Cells – select cells C2:C6 as these are the No. of cars that you will be able to sell, basically the variable cells
• Press OK
• Enter values for each Car

I have entered values as above, you can enter whatever you like.

Similarly add 1 more Scenario and name it as ‘Worst Case’. The changing cells will ofcourse remain the same.

I have put in the below values for Worst case.

You can create many more scenarios like this.

Compare the scenarios

Now that your scenarios are created, let’s compare them.

In the Scenario Manager window, click on Summary.

You will now be asked for ‘Result cells’. Choose the Total Sales Value, cell D8, as that’s what you want to compare. If you want to compare more outputs, you can choose multiple cells here too.

A new Sheet will be created automatically on pressing OK which will give you a comparison of the Current values in your Sheet + the 2 scenarios you created.

Thus, in best case, the Total Sales is over Rs. 6 CR. Worst Case is 3.77 CR.

Now you can take your business decisions based on this output.

Conclusion

Thus, we can conclude that what-if analysis is an integral part of the tools any data analyst or middle to senior management uses. Using the 3 tools in what if, you can analyze data much quickly than if you try to do the same using formulas, thereby allowing you to take faster and accurate decisions.

• Goal seek is for Reverse calculations.
• Data Table is for 1 or 2 inputs changing, resulting changes in output.
• Scenario Manager is to compare multiple business scenarios based on multiple inputs changing.

Many features in different versions of excel work differently, but what if analysis in excel 2010 works same way as what if analysis in excel 2013 and what if analysis in 2007 or 2016.

Take up the Data Analytics using Excel Course to become a proficient Data Analyst.

Another helpful Excel guide from Acuity Training’s Nick Williams.

What-if analysis is a useful way of being able to test out various scenarios in Excel.  You can look at these things two different ways.

The first way is to change the input variables and see what impact that has on the output. The scenario manager and data tables work in this way and can be used to answer questions like, what would happen to our profits if the number of units we sell doubled, or what would happen to our profits if the cost price of each of our units sold increased by 10%.

The second way is to say what outcome you would like to have and ask Excel to calculate what change in the inputs would be required to achieve this. The goal seek feature works this way and can answer questions such as how many units of a product need to be sold in order to reach a desired profit level.

Scenario Manager

The following example looks at scenarios showing the profit from selling 100 apples, with differing levels of mark-up.

The first step is to create some scenarios.  The scenario manager can be found on the Data ribbon, under What-If Analysis.  Click the Add button to start creating new scenarios.  The next dialog box will ask for a name for the scenario and which cells are to be changed.  A scenario can contain up to 32 changing cells, although in reality, most scenarios will use far fewer than this.  Once the scenario name and cells to be changed have been selected, click the OK button and fill in the values for each cell to be used in the scenario.  From here, click Add to continue adding more scenarios, or OK when finished.

For this example, four scenarios have been created – for a 50%, 100%, 150% and 200% markup.  There are two ways that a scenario can be applied – it can either be shown on the worksheet itself, or a summary can be created.  The below table shows the results when a 50% markup is applied.  This was achieved simply by selecting the 50% Markup scenario from the Scenario Manager and clicking the Show button.  50% has been entered into the Markup column, and the figure in the Profit column, which is calculated using a formula referring to this has updated accordingly.

To compare results from several scenarios simultaneously, the Summary option can be used.  As with the Show option, the Summary report is accessed from the Scenario Manager dialog box.  There are two options here; Scenario summary and Scenario PivotTable Report.  Although the option is there to display the results as a PivotTable report, in most cases, the summary will display the results in a more user-friendly way.

The below shows the results from the scenario summary, demonstrating that the profit changes depending on the markup scenario used.  Note that the Changing Cells and Result Cells are shown using their cell references.  In this example, they have been left so that they can be referred against the table above, however in practice, it will make the report easier to read if the cells have been named.

Goal Seek

The scenario manager is good for known variables, however, sometimes it is desirable to work backwards.  Using the same example of selling 100 apples, we might want to know what markup we would need to use in order to achieve a profit of £25.  Goal Seek can be used to answer exactly these sorts of questions.

Goal Seek can be found on the Data ribbon, under What-If Analysis.  It simply asks for three parameters.  Set cell refers to the cell we want to contain the goal value.  In this case it is E2, the cell showing the profit on apples.  The value in the To value box should represent the goal, in this case 25, representing the desired £25 profit.  Finally, the By changing cell box should show the cell reference for the cell to be manipulated in order to achieve the goal, in this case the markup.

Upon pressing OK, Excel will look for a solution, displaying a dialog box like the one below when it has finished.  Note that in the example below, cell C2 has been updated to show a 250% markup and cell E2 showing the profit has updated accordingly.  Pressing OK will confirm these changes and commit them to the worksheet, while pressing cancel will see the cells revert back to their previous values.

Data Table

Scenario summaries give a table showing data from various scenarios, however, they do not update if the data they are based upon changes.  In the apple sales example, we might not need scenarios based on the cost price, as this is a non-controllable factor, yet it could still change in the future.  The scenario summaries based upon it would not change if this was updated, whereas a data table would.

Data tables can be based on either one or two variables.  For a single variable, a two column data table is required.  The first column should contain the variable, whilst the second should be left blank for Excel to populate.  The exception to this is the very first row, where the second column should show the formula on which the calculation is based.

To populate the data table, select the entire table (in the case of this example this would be cells H2 to I6) and navigate to What-If Analysis on the Data ribbon, and choose Data Table from the drop down menu.  On the dialog box that appears, select the cell containing the variable as the column input cell.  This tells Excel to use the value in the input column instead of this cell in the formula performing the calculation.  Press OK, and Excel will populate the rest of the data table.

A two variable data table works in much the same way, however the layout is slightly different.  Instead of consisting of two columns, there should be one column containing the values for the first variable, with a row containing the values for the second variable.  The formula should go in the top left corner, where the two meet.

As with a single variable data table, highlight the entire table, so B6 to F10 in the example, and select Data Table from the What-If Analysis Dropdown on the Data ribbon.  This time, enter the cells containing both the row and column variables in the formula.  Press OK, and Excel will populate the table.