3. Spreadsheet modelling features

Some of the features available within a spreadsheet that make it a good tool for modelling include :-

Supports the idea of variables

This is essential in order to change input values and alter pre-set numbers in the model such as VAT rate or tax levels.

Use of formulas

A model needs to be able to do maths on the input values and this is just what formulas can do.

Use of functions

This is a real time-saver as spreadsheets have hundreds of functions you can use for building up the model - for instance there is a function that can do compound interest calculations. If it did not support functions then you would have to do all the hard calculations yourself by using formulas.

Supports Goal Seek

This is a very powerful feature where the goal-seek feature will find the correct input value given what you want the answer to be. It is like running the model backwards in time.

For instance, I want to make 20% profit margin overall, I know how many of each item I sell, so what does the mark-up need to be?

Provides a wide range of Graphs

A model is often concerned with not just getting a single answer, but also needs to show how that answer is reached over time. Graphs are an ideal way of doing this.

Dynamic calculation

A spreadsheet is very fast on a modern computer, so you can set up a powerful model with thousands of calculations and yet you can expect an answer very quickly.