2. Spreadsheet modelling

Any model needs a set of input values, a way to work on those input values and then provide one or more output values. This is the case no matter if you are doing it on a humble laptop or the world's biggest super-computer.

A spreadsheet can deal with a lot of numbers, do some work on them and produce some answers, so spreadsheets are ideal tools to use for straight-forward financial modelling.

You tweak an input value and you immediately see the effect it has on the output value(s)

A typical set of questions you may ask of a spreadsheet financial model would be :-

Spreadsheet scenario

 

- "What will happen to my profit if I put up the price by 10%?"

- "If I reduce the number of staff by one, how will that affect the end of month profit?"

- "How many items do I need to sell before breaking even?"

- "what is the interest I will earn if my money goes into that savings account?"

 

 

It is a good idea to use a spreadsheet to make business decisions because:

- it allows you to keep testing different scenarios until you find one that suits your needs

- there is no financial risk to your business or staff

- you can see the result immediately rather than having to wait for a month/year in real life

 

challenge see if you can find out one extra fact on this topic that we haven't already told you

Click on this link: Spreadsheet Models