What Is the What-If Analysis in Excel

Microsoft Excel is a powerful spreadsheet tool created by Microsoft. With many capabilities to handle a vast amount of data and perform various calculations, the software program has become the go-to for many business organizations and individuals. One of the features of Microsoft Excel that sets it apart from other programs is its What-If Analysis tool. The What-If Analysis is a function in Microsoft Excel that allows users to explore different scenarios by changing one or more variables in a formula. In this article, we will explain the What-If Analysis feature, its applications, and how it works in Microsoft Excel.

What is What-If Analysis in Excel?

What-If Analysis is a feature in Microsoft Excel that provides a way for users to explore different scenarios by changing variables in a formula. There are three main types of What-If Analysis in Excel:

• Data Tables
• Scenario Manager
• Goal Seek

Data Tables

Data Tables are used when you want to see multiple results based on different variables. For example, if you have a sales forecast that is based on different possible scenarios, such as different sales numbers, prices, or discounts, you can build a data table to show the various outcomes.

To create a Data Table:

1. Select the range of cells containing the formula you want to use for the Data Table.
2. Go to the ‘Data’ tab and select ‘What-If Analysis’.
3. Select ‘Data Table’ from the drop-down menu.
4. In the ‘Column input cell’ or ‘Row input cell’ field, enter the range of cells that contain the variables you want to use for the Data Table.
5. Click ‘OK’, and Excel will generate the Data Table.

Scenario Manager

Scenario Manager allows you to create and compare different scenarios for a particular worksheet. For example, you could create different sales scenarios, one with high sales numbers and another with low sales numbers.

To create a Scenario Manager:

1. Select ‘What-If Analysis’ from the ‘Data’ tab.
2. Select ‘Scenario Manager’ from the drop-down menu.
3. Click ‘Add’ to create a new scenario.
4. Enter a name for the scenario and change the values of the cells you want to modify.
5. Click ‘OK’, and Excel will save the scenario.

Goal Seek

Goal Seek allows you to find the input value necessary to achieve a particular output value. For example, if you want to achieve a sales goal of $100,000, you can use Goal Seek to determine the number of sales you need at a given price point.

To use Goal Seek:

1. Select ‘What-If Analysis’ from the ‘Data’ tab.
2. Select ‘Goal Seek’ from the drop-down menu.
3. In the ‘Set cell’ field, enter the cell that contains the formula you want to use.
4. In the ‘To value’ field, enter the desired output value.
5. In the ‘By changing cell’ field, enter the cell that contains the input value you want to change.
6. Click ‘OK’, and Excel will determine the necessary input value to achieve the desired output value.

Now that you know what What-If Analysis is in Excel, you can put it to use in your own spreadsheets to explore different scenarios and make informed decisions. Whether you’re doing financial forecasting or analyzing sales data, What-If Analysis can help you find the insights you need.

Tips for Using What-If Analysis in Excel

Here are some tips to help you get the most out of What-If Analysis:

• Make sure that your worksheet is set up correctly before using What-If Analysis. All the necessary formulas and cells must be correctly entered to get accurate results.
• Save a copy of your worksheet before using What-If Analysis, in case you want to go back to the original version later on.
• Choose the type of What-If Analysis that best suits your needs. Data Tables, Scenario Manager, and Goal Seek each have their own strengths, depending on the type of data you’re working with.
• Use named ranges to make your formulas easier to read and understand, especially for more complex worksheets.
• Remember that What-If Analysis is a tool for exploring different scenarios, but it does not replace careful analysis and judgment in making important decisions.

Common Mistakes with What-If Analysis

Here are some common mistakes to avoid when using What-If Analysis:

• Forgetting to lock cells in formulas. If you don’t lock cells that contain formulas in a What-If Analysis scenario, Excel will adjust them automatically, potentially creating incorrect results.
• Using inconsistent units or formats for variables. If you’re working with different units or formats for variables, the results of your What-If Analysis may be meaningless or difficult to interpret.
• Overcomplicating your scenarios. It’s easy to get carried away with What-If Analysis and create scenarios that are too complex or unrealistic. Keep your scenarios as simple and relevant as possible to get meaningful insights.
• Not updating your scenarios. If you make changes to your worksheet after creating a What-If Analysis scenario, make sure to update the scenario accordingly to avoid inaccurate results.
• Forgetting to save your scenarios. If you don’t save your What-If Analysis scenarios, you won’t be able to come back to them later or share them with others.

What-If Analysis is a powerful tool that can help you explore different scenarios and make informed decisions in Microsoft Excel. With the right approach and an understanding of its capabilities and limitations, What-If Analysis can be a valuable asset for businesses and individuals alike.

FAQs

Here are some common questions about What-If Analysis in Excel:

What is the What-If Analysis used for?

What-If Analysis is used for exploring different scenarios by changing variables in a formula. This feature is useful for businesses and individuals who need to forecast sales, analyze data, or make budgetary decisions based on different scenarios.

Is What-If Analysis difficult to use?

What-If Analysis can be challenging if you’re not familiar with Excel’s formulas and functions. However, Excel provides step-by-step guides for each type of What-If Analysis, and with practice, anyone can learn to use it effectively.

Is What-If Analysis only for financial modeling?

No. While What-If Analysis can be useful for financial modeling, it is not limited to it. It can also be used to explore scenarios in other fields, such as marketing, sales, and inventory management.

Can I undo What-If Analysis?

Yes. You can undo What-If Analysis by clicking the ‘Undo’ button, or by closing and reopening the worksheet. If you need to go back to the original worksheet after making several changes, it’s a good idea to save a copy of it first.

Are there any alternatives to What-If Analysis?

Yes. If you’re not comfortable using What-If Analysis, there are other tools available for exploring different scenarios, such as Monte Carlo simulation. However, What-If Analysis is a quick and relatively simple way to explore different possibilities in Excel.