5. Limitations of spreadsheets for modelling

If spreadsheets are so good why not use them all the time?

The answer lies in how complicated a model needs to be. model

For instance there is a limit as to how much data a spreadsheet can handle, a typical worksheet can only hold 64,000 rows of data and doing complicated calculations on 64,000 rows of data is going to bring your personal computer down to a crawl. So it is a balance of speed versus how complicated a model needs to be.

A spreadsheet is also a poor choice if the model needs to change over time as it is run, for instance the model may include an assumption that interest rate will change in a certain way over time rather than being a fixed value.

For this kind of modelling you need to leave behind spreadsheets and start to use more powerful financial simulation software - usually costing tens of thousands of pounds - plus the cost of programming the model in the first place.

 

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 Limitations