What If Analysis
Minggu 13
What-if analysis in Microsoft Excel
What-if analysis is a powerful strategy for understanding the
relationships in a data set and using this understanding to improve
decision making. In order for what-if analysis to work, the relationships
between the entities in a workbook should be linked by formulas instead
of filled in with actual amounts. Using formulas enables the workbook
to recalculate when we change an entry in one of the relationships. We
will demonstrate what-if analysis using a multi-worksheet budget for
Brunswick, Maine which I found on the Internet.
The Brunswick, Maine budget workbook contains a
Summary worksheet and 29 detail worksheets, which provide details for
each of the revenue and expenditure categories. The budget contains
three versions: the first developed by the administrative departments
in the city government, the second budget was presented by the city
manager, and the third was the budget adopted by the city council.
While all three budgets are similar, we do find areas where the city
council cut expenditures from the departmental proposal , e.g. see the
Public Works and Human Services detail worksheets.
What If Analysis, Slide 2
Copyright © 2004, Jim Schwab, University of Texas at Austin
Open the budget database
We will use an old budget from
Brunswick, Maine to demonstrate
doing what-if analysis in Excel.
What If Analysis, Slide 3
Copyright © 2004, Jim Schwab, University of Texas at Austin
SUM function computed totals on budget detail
worksheets
Each of the detail budget
pages contains the items of
revenue or expenditure in a
specific budget category.
The Excel Sum function is
used to total each column
so that a change in any
item in a category will
automatically produce the
correct total.
First, select the
detail worksheet
Taxes Rev.
What If Analysis, Slide 4
Second, click on cell B11
to see the SUM function
in the formula bar.
Copyright © 2004, Jim Schwab, University of Texas at Austin
Displaying the formulas on the summary page - 1
In order to do what–if
analysis, the various
items on the worksheets
must be connected by
formulas so that a
change in one item
produces a change in the
all the other items linked
to the first item. If the
worksheet cells contain
the only numbers, a
change in one item will
not have an impact on
the others.
First, select the
summary worksheet
Summary.
What If Analysis, Slide 5
Second, to see the
formulas on the summary
worksheet, select the
Options command from the
Tools menu.
Copyright © 2004, Jim Schwab, University of Texas at Austin
Displaying the formulas on the summary page - 2
Next, click on the View tab
in the Options dialog box
to bring this page to the
fore.
Finally, mark
the Formulas
checkbox
and click on
the OK
button.
What If Analysis, Slide 6
Copyright © 2004, Jim Schwab, University of Texas at Austin
The formulas on the budget summary worksheet
Every cell in the Summary worksheet contains a
formula, function, or reference to another cell in the
workbook, except for the cells Taxable Valuation in
the tax calculation section of the worksheet which
are not contained any other place in the workbook.
For example, cell B6 on the
Summary worksheet contains a
reference to the cell on the
detail worksheet that contains
the sum function totaling the
different tax items
What If Analysis, Slide 7
Copyright © 2004, Jim Schwab, University of Texas at Austin
Removing the display of formulas from the worksheet
To change the cell contents back so
that they display numeric and text
entries, we clear the check box for
Formulas in the Options dialog.
After selecting the Options
command from the Tools menu,
clear the Formulas checkbox
and click on the OK button.
What If Analysis, Slide 8
Copyright © 2004, Jim Schwab, University of Texas at Austin
Split worksheet so multiple parts can be viewed
First, scroll down the
worksheet until row 21 is
the top row in the
window.
Second, select row 29 as
the row below where we
want to locate the split.
What If Analysis, Slide 9
Third, select the
Split command from
the Window menu.
Copyright © 2004, Jim Schwab, University of Texas at Austin
'Total Revenues' is in multiple places on worksheet
In the lower pane,
scroll down so that row
50 is the top row in the
pane.
What If Analysis, Slide 10
The cells for Total Revenues in the tax
calculations section of the worksheet
(yellow cells) contain references to the
total revenue in the revenue estimates
section of the budget (blue cells). This
is done so that a change in one of the
revenue categories also impacts the
calculation of the tax rates.
Copyright © 2004, Jim Schwab, University of Texas at Austin
'Total Expenditures' is in multiple places on worksheet
In the upper pane, scroll
down so that row 42 is
the top row in the pane.
What If Analysis, Slide 11
The cells for Total Expenditures in
the tax calculation section of the
worksheet (yellow cells) contain
references to the total expenditures
in the budget summary (blue cells).
This is done so that a change in the
expenditure categories also
impacts the calculation of the tax
rates.
Copyright © 2004, Jim Schwab, University of Texas at Austin
'Property Taxes' equals 'Required Property Tax'
The difference between the expenditures
and the available revenue represents the
amount that needs to be collected in
property taxes. The amount shown for
Property Taxes in the revenue budget
(blue cells) is a reference to the amount
required from property taxes in the tax
calculation section of the worksheet
(yellow cells).
What If Analysis, Slide 12
Copyright © 2004, Jim Schwab, University of Texas at Austin
Removing the splitter bar from the worksheet
When we used the Split
command from the Window
menu, Excel changed the
menu command to Remove
Split.
To remove the splitter bar
from the worksheet, select
the Remove Split command
from the Window menu.
When we have issued the
command, the splitter bar
will disappear.
What If Analysis, Slide 13
Copyright © 2004, Jim Schwab, University of Texas at Austin
What impact does a change in expenditure have on
the budget
First, navigate to the
General Government
Exp. worksheet.
What If Analysis, Slide 14
Second, in the general expense
category, the city council reduced
the administrative request for city
office buildings from $162,679 to
$91,757. The $91,757 was part of
the $2,618,151 total recommended
in the 1997-98 Council budget.
Copyright © 2004, Jim Schwab, University of Texas at Austin
Change in expenditure for municipal building
Suppose that the fire department is insisting that the
occupancy level in city offices is too large to be safe
and have recommended restoring the allocation to
the full amount requested in the administrative
budget. We can use our budget workbook to study
the impact of complying with this request.
First, change the
expenditure for the
municipal building in the
city council's budget in
cell D16 so that it equals
the amount in the 199798 Department budget
in cell B16. Enter the
formula =B16 in cell
D16.
Second, the immediate impact is an
increase in the Total for general
government expenditures from
$2,618,151 to $2,689,073 in cell D22.
What If Analysis, Slide 15
Copyright © 2004, Jim Schwab, University of Texas at Austin
Impact of changing expenditure on total expenditures
First, navigate back
to the Summary
worksheet.
First, on the summary worksheet, the
total for General Government in the
1997-98 Council increases to $2,689,073
in cell D36 to match the total on the
General Government worksheet.
Second, this increase is
reflected in the increase
to $32,144, 925 in cell
D45 for Total
Expenditures.
What If Analysis, Slide 16
Copyright © 2004, Jim Schwab, University of Texas at Austin
Impact of changing expenditure on the tax calculations
The increase in expenditures
impacts all of the rows related to
expenditures in the tax calculation
section of the worksheet.
With no change in revenues,
an increase in expenditures
increases the amount need
from property taxes.
With no increase in taxable property, an
increase in expenditures increases the tax
rate from $20.00 to $20.02. While an 8 cent
increase in tax per $1,000 of valuation is not
large fiscally, it could be large politically
What If Analysis, Slide 17
Copyright © 2004, Jim Schwab, University of Texas at Austin
Tracking the relationships among cells in the workbook
Suppose that we had a question about the results we obtained
in the what-if analysis and wanted to track the path of changes that
resulted from the initial change in spending on municipal buildings.
Excel can assist us with its auditing tools that show the relationships
among cells by the blue arrows it adds to the worksheet. If we start
with the first cell in the path, we can display subsequent linked cells
with the Trace Dependents tool. If we start with the last cell in the
path, we can display the path with the Trace Precedents tool, though
this is usually a more complex display because one cell can have
multiple precedents.
These auditing tools can be invaluable when you are checking
a workbook to make sure you have properly included all of the relevant
cell links needed to make the workbook function effectively.
What If Analysis, Slide 18
Copyright © 2004, Jim Schwab, University of Texas at Austin
Activating the Auditing toolbar
We can make the task to tracking dependents
simpler if we activate the auditing toolbar. This will
eliminate the need to access submenus each time we
want to track the next dependent. To activate the
Auditing toolbar, we select the Formula Auditing >
Show Formula Auditing Toolbar from the Tools menu.
What If Analysis, Slide 19
Copyright © 2004, Jim Schwab, University of Texas at Austin
Selecting the source cell whose dependents we want
to trace
The Formula
Auditing tool bar
appears over the
worksheet.
First, navigate to the
General Government Exp.
Worksheet which
contains spending
projections for municipal
buildings.
Second, highlight cell D16
which contains the city council's
initial allocation for municipal
buildings, and enter the original
amount, $91,757, entered for
the 1997-98 Council budget.
What If Analysis, Slide 20
Copyright © 2004, Jim Schwab, University of Texas at Austin
Displaying the first dependency relationship
First, with cell D16 selected,
click on the Trace Dependents
tool button. A blue auditing
arrow appears on the worksheet.
Second, the round dot marks the source
cell of the dependency relationship. For
the first dependency relationship, this
cell will always contain a value, not a
formula. A cell marked with a dot is also
referred to as a precedent cell for the
dependent cell marked with the arrow
head.
What If Analysis, Slide 21
Third, the arrow
end shows the first
dependent cell.
Dependent cells
will always contain
formulas that have
the source cell as
an input.
Copyright © 2004, Jim Schwab, University of Texas at Austin
A dependency arrow to another worksheet
Click again on
the Trace
Dependents tool
button.
This time the auditing tool show an
arrow with a dashed line pointing to
a worksheet icon. This is the
auditing tool's message that the
next dependent relationship in the
chain is located on a different
worksheet
What If Analysis, Slide 22
Copyright © 2004, Jim Schwab, University of Texas at Austin
Navigating to worksheet containing the dependent cell
To navigate to the worksheet
containing the dependent
relationship, we double click
on the arrow head pointing
to the worksheet icon.
What If Analysis, Slide 23
Copyright © 2004, Jim Schwab, University of Texas at Austin
Completing the Go To dialog box
Double clicking on the arrow head
opens the Go To dialog box with the
full name of the workbook,
worksheet, and cell containing the
dependent relationships. We
highlight the one we are interested
in.
Click on the OK
button to complete
the navigation.
What If Analysis, Slide 24
Copyright © 2004, Jim Schwab, University of Texas at Austin
The dependent cell on another worksheet
The Go To dialog box indicated that
the dependent cell was D36 on the
Summary worksheet, which is exactly
where we end up.
What If Analysis, Slide 25
Copyright © 2004, Jim Schwab, University of Texas at Austin
Dependent relationships on Summary worksheet
First, click on the Trace Dependents tool button
until there are no additional dependent
relationships (6 times). Each time you click on
the tool button, Excel displays one additional
relationship. Note that many cells in the chain
have both a blue dot and a blue arrow, indicating
that they are simultaneously a source for some
cell and a dependent of another cell.
Second, highlight a
cell with an arrow
head in it, e.g.,
D45, and examine
the contents of the
formula bar.
Third, we see in the formula bar that the
source cell for this relationship (D36) is
included in the range of cells (D36:D44)
summed in the dependent cell D45.
What If Analysis, Slide 26
Copyright © 2004, Jim Schwab, University of Texas at Austin
The end of a chain of dependent relationships
As we track through the chain of
blue arrows, we will eventually reach
a cell that contains a dependency
arrow head, but no source dot. This
arrow head marks the end of the
path for one of the chains. There
are no additional dependency
relationships for this cell.
What If Analysis, Slide 27
Copyright © 2004, Jim Schwab, University of Texas at Austin
A second terminal cell in the chain of dependent cells
There is an additional terminal cell in the chain of
dependent relationships linking back to spending
on municipal buildings. Recall, when we set up
the worksheet, that we linked Property Taxes in
the Revenue section of the budget to the amount
of property tax required in the tax collection
section of the budget. Excel has tracked this
linkage though it is difficult to see because the
blue shafts of the connecting arrows overlays the
arrows leading to the tax rate cell. However, if we
look carefully, we can see an arrow head in cell
D28, which links the calculated amount for
property taxes in cell D59. Cell D28 is, in turn, a
precedent cell for cell D30, which is the second
terminal cell in our chain of dependencies.
What If Analysis, Slide 28
Copyright © 2004, Jim Schwab, University of Texas at Austin
Clear the blue auditing arrows from the worksheet
To remove the blue auditing arrows from the
worksheet, we click on the Remove all Arrows tool
button. Note we can also remove dependency
arrows one at a time by clicking on the Remove
Dependent Arrows tool button to the right.
This only clears the arrows from the
active worksheet. If we want to clear
the arrows from other worksheets, we
must navigate to that worksheet before
using he Remove All Arrows tool.
What If Analysis, Slide 29
When we have
removed the
blue arrows,
close the
Formula Auditing
tool bar.
Copyright © 2004, Jim Schwab, University of Texas at Austin
Using Goal Seek in What-if Analysis - 1
Excel contains another tool that can be very useful in what-if
analysis that starts with a desired result and computes how other cells
must change to achieve this result. Unfortunately, it only works for
cells that contain an actual value in the cell that is the target of the
change. It will not work for cells which have a formula. In other words,
Goal Seek will work back one relationship in a chain of linked cells, but
cannot work back past that. We can, of course, remove the formulas in
the chain of precedents and continue to use ‘Goal Seek’ to work
backward in the sequence of changes. Nonetheless, when we meet this
requirement, it is a useful tool.
In the tax calculation section of the Brunswick budget,
the tax rate is computed by dividing the needed amount of property tax
revenue by the total assessed value of taxable property in the tax
district. Now, suppose one of the council members says that he made a
campaign promise to reduce the property tax rate to $19.75 per $1000
of taxable property. Before he will vote for the budget, he wants to
make sure that everything has been done to try to keep this campaign
promise. Knowing he doesn’t have the votes on the council to reduce
spending and unable to propose any new sources of revenue, he
proposes looking at the way property values are assessed.
What If Analysis, Slide 30
Copyright © 2004, Jim Schwab, University of Texas at Austin
Using Goal Seek in What-if Analysis - 2
He claims that if the assessment office were a little more
aggressive in setting property values, the total valuation could be
increased enough to reduce the tax rate without causing any real
hardships on taxpayers.
The council focuses on the question of what would the Taxable
Valuation have to be in order to reduce the tax rate to $19.75.
What If Analysis, Slide 31
Copyright © 2004, Jim Schwab, University of Texas at Austin
Finding the answer by trial and error
We can try to find a solution by
trial and error. We change the
contents of cell D64 from
$916,000,000 to $920,000,000.
This reduced the tax rate from
$20.00 to $19.91, falling short
of the goal.
What If Analysis, Slide 32
Copyright © 2004, Jim Schwab, University of Texas at Austin
A second round of trial and error solutions
Next, we increase cell D64 to
$925,000,000. Again the tax
rate decreases somewhat, but
falls short of the goal.
Trial and error could take a long
time, so we decide to use
Excel's Goal Seek tool.
What If Analysis, Slide 33
Copyright © 2004, Jim Schwab, University of Texas at Austin
Using the Goal Seek tool
First, we select
Goal Seek from
the Tools
menu.
What If Analysis, Slide 34
Copyright © 2004, Jim Schwab, University of Texas at Austin
The Goal Seek dialog box
When we select Goal Seek from
the Tools means, it opened the
Goal Seek dialog box.
First, in the Goal Seek dialog,
we enter the cell whose value
we want to set, D66.
Second, we enter the
value we want this
cell to contain, 19.75.
Fourth, we click on
the OK button to
complete this action.
What If Analysis, Slide 35
Third, we tell Excel
which cell to change to
meet our objective, cell
D64.
Copyright © 2004, Jim Schwab, University of Texas at Austin
Goal Seek produces a solution
Second, Goal Seek returns the
Goal Seek Status dialog box to
inform us that it has found a
solution. We click on the OK
button to accept the solution.
First, Goal Seek computes the changed
value and enters it into the designated
cell. Taxable Valuations would have to
increase to $927,613,554 to reduce the
Tax Rate to 19.75. The council can debate
the political feasibility of the solution.
What If Analysis, Slide 36
Copyright © 2004, Jim Schwab, University of Texas at Austin
A second problem for Goal Seek
Impressed with Goal
Seek's ability to answer
the question, another
council member asks it to
compute what decrease in
total expenditures in cell
D54 would be required to
reduce the Tax Rate to
19.75, keeping the
Taxable Valuation at
$916,000,000.
Second, we
select Goal Seek
from the Tools
menu.
What If Analysis, Slide 37
First, we change
the value in cell
D64 back to its
original value,
$916,000,000.
Copyright © 2004, Jim Schwab, University of Texas at Austin
Complete the Goal Seek dialog box
First, in the Goal Seek dialog,
we enter the cell whose value
we want to set, D66; the value
we want this cell to contain,
19.75; and which cell to change
to meet our objective, cell D54.
Second we click on
the OK button to
complete this
action.
What If Analysis, Slide 38
Copyright © 2004, Jim Schwab, University of Texas at Austin
A goal seek error message
When we click on the OK button
to complete this action, Excel
informs us that cell D54 must
contain a value instead of the
formula which it now contains.
What If Analysis, Slide 39
Copyright © 2004, Jim Schwab, University of Texas at Austin
Change the cell from a formula to its value
First, with cell D54 highlighted,
we select the Copy command
from the Edit menu to copy the
cell’s contents to the clipboard
Second, with cell D54 still
highlighted, we select Values
from the drop down menu for
the Paste tool button. Cell D54
now contains value 32,074,003.
What If Analysis, Slide 40
Copyright © 2004, Jim Schwab, University of Texas at Austin
Using the Goal Seek tool with the changed value
First, we select
Goal Seek from
the Tools menu.
What If Analysis, Slide 41
Copyright © 2004, Jim Schwab, University of Texas at Austin
Complete the Goal Seek dialog box with the changed
value
First, in the Goal Seek dialog,
we enter the cell whose value
we want to set, D66; the value
we want this cell to contain,
19.75; and which cell to change
to meet our objective, cell D54.
Second we click on
the OK button to
complete this action.
What If Analysis, Slide 42
Copyright © 2004, Jim Schwab, University of Texas at Austin
Goal Seek thinks if found and answer
Second, Goal Seek returns the
Goal Seek Status dialog box to
warn us that it may not have
found a solution. The solution is
so far off that is obviously an
error, as Excel suspects. We
should click on the Cancel
button to reject the solution.
First, Goal Seek
computes a solution and
enters it into the
designated cell.
Goal Seek works well for relationships involving two cells, when
the cell for which we want to set the value contains a formula
and the cell whose value we want Excel to change contains a
value. When our problem meets these requirements, Goal Seek
is a useful tool. When our problem does not meet these
requirements, we revert to Trial and Error solutions.
What If Analysis, Slide 43
Copyright © 2004, Jim Schwab, University of Texas at Austin