Create Sensitivity Analysis in Excel
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ScribdTranslationsCreate Sensitivity Analysis in Excel
Uploaded by
ScribdTranslationsCreate the sensitivity analysis in Excel
Before creating the sensitivity analysis in Excel, I must add the
data for which the different scenarios will be created in Excel. Such as
you can see, in row 7 I have placed different sales amounts and in the
In column B (below the previous calculations), I have placed different
amounts of variable expenses.
In order to create the sensitivity analysis in Excel, we must
Select the data range B7:F11 and press the Analysis button and continue.
find in the Data tab and then select the Table command
of data.
In the Input Cell option (row) I will place the reference to the cell that
it contains the original sales amount (B4) and as an input cell
I will specify the cell that contains the variable expenses (B6).
Pressing the Accept button will perform the calculations to obtain the earnings
for each of the indicated combinations of values.
With this data table, we can analyze and reach very important conclusions.
interesting about our information. We can observe that if sales
were actually for 65,000 dollars and the variable expenses increased to
35,000 dollars then we would start to incur losses in the business.
On the other hand, we can observe that the financial break-even point occurs
when sales are 75,000 dollars and variable expenses are
40,000 dollars leaving us with neither losses nor gains. In short, we can move on.
considerable time analyzing the information to be able to decide if it is worth it
it's worth investing our money in this business.
What Excel has done is that for each possible value of sales and of
variable expenses that we have specified the formula has calculated
profits that are in cell B7. This is a great benefit for us
because instead of replacing the values of cells B4 and B6 to see
the behavior in the profits Excel will perform all calculations in a
Just step and they will be placed on the data table.
The analysis will become interesting if for each investment project that
you conduct a sensitivity analysis in Excel to compare them
between them and decide on the alternative that represents the least risk
possible and that has the highest profitability.
Table of two variable data
In the previous article, I showed the benefits of data tables as a
Option of Analysis And yes. On this occasion we will review a classic example.
about the use of a data table to conduct an analysis of two variables.
The scenario is as follows. Let's suppose I want to apply for a loan.
personal to a bank, I am doing research with several banks and
each of them has given me a different interest rate as well as
various payment deadlines. The first of the cases I investigated is the
next
Data table of two variables
Instead of calculating for each option of interest rate and term,
I will arrange the data properly to form a data table. In the
I will specify the different interest rates and in the columns the
possible deadlines.
To create the data table for two variables, I will select the range B4:G11 and
I have to go to the Data tab and press the Analysis button to select the
data table option. Inside the dialog box, I will have to choose each one
from the input cells for the data table in the following way:
Clicking the Accept button will generate the data table
corresponding
In this data table, we can observe what we expected; the greater
it is the deadline the monthly payments are reduced and the higher the rate of
interest the monthly payment increases. With this information I can
analyze and appropriately choose the option that best fits my
monthly payment options.
Data tables are a tool that helps us in analysis.
our information, the only disadvantage is that it can only be done
the analysis of two variables at most. In case you find yourself in
a situation that requires an analysis of three or more variables
I recommend using Scenarios or also using Excel Solver.
Datatable
Data tables are part of the Analysis tools and yes they
they allow us to change the value of some cells to see how it is affected
the original result. A data table analyzes a set of values and
determine possible outcomes.
Data table of a variable
The simplest example of a data table is one that uses a
variable to perform the calculations. Let's assume the following scenario:
In this example, I am making a sales projection for the year.
2011 based on the sales of the year 2010 and expecting a rate of
2.5% growth. What I want to do is know what the projection would be.
of sales for 2011 if the growth rate were different. To make
In this analysis, I will place the growth rates that I wish to use from the
in the following way:
To create the data table, I must select the range of cells just as it is
show in the previous image and then go to the Data tab, and within the
Data tools group press the Analysis button And if for
then select the option Data Table.
The Data Table dialog will be displayed and in the Cell text box
in the input (column) you must select cell B2 which is the cell that
it contains the growth percentage.
By clicking the Accept button, the cells adjacent to the rates will be filled.
growth with the corresponding sales projection value
each of the rates.
Excel has created the data table in the range B5:B13 and in this way
I can analyze the different sales projections for a rate of
different growth. Once I have finished analyzing the information,
if I try to delete any of the cells belonging to the table range
of data, Excel will display a message warning that it cannot
change part of a data table. If you wish to delete the data table
You must first select the entire range before pressing the key.
suppress.
Using Excel Solver
If you have the need to make a forecast that involves more than one
variable, you can use Solver in Excel. This add-in will help you
analyze multivariable business scenarios and optimization.
Example of using Solver
The example is as follows. I have a pizza selling establishment that
offers two types of traditional pizza, Pepperoni ($30) and Vegetarian ($35)
in addition to the special Supreme pizza ($45). We don't know what the
potential income of the establishment and also the emphasis that is
I should give each type of pizza to maximize sales.
Before conducting the analysis, we must consider the following conditions.
Given our production capacity, we can only produce 150.
pizzas per day. Another condition is that we cannot exceed 90 pizzas.
traditional (Pepperoni and Vegetarian) and also, since there are not many
vegetarians in the area, we estimate selling a maximum of 25 pizzas
vegetarian a day. Another condition to consider is that we can only
buy the necessary ingredients to produce 60 Supreme pizzas for
day.
With this information, I will prepare the following Excel sheet:
Note that all the business rules are represented in the data.
of the establishment. For each type of pizza, I have placed the total number of pizzas to
sell (for now at zero), the subtotal of each one, as well as the total of
sales that are formed by the sum of the subtotals. Also under the
Restrictions
Something very important is to establish the equivalences for the restrictions.
For example, one restriction is that the total number of pizzas cannot exceed
150, but Excel does not necessarily know what "Total of pizzas" means,
so I have allocated a cell to specify that the total number of pizzas is the
sum of the cells B2+B6+B10. The same happens to explain what
Traditional Pizzas.
The data is already ready to use Solver, so you need to go to the tab
Data and click on the Solver command where the box will be displayed
Solver Parameters dialog.
In our example, what we want to maximize is the total sales.
that the cell is specified in the text box Set objective
$E$1 and of course I selected the Max option. The other important parameter
they are the variable cells that in our example are the pizzas to be sold
for each of the different types.
Finally, observe how the constraints are reflected in the table.
sales conditions of the establishment. Pay special attention to the way
In what have the equivalents used in cells $E$10 and $E$11 been utilized?
Everything is ready to continue. You just need to click the button.
Solver and Excel will start calculating different values for the cells
variables until finding the maximum value for total sales. To
At the end of the calculation, the Solver Results dialog box will be displayed.
Just click Accept to see the results in the Excel sheet.
Excel has done the calculations to know that, with the restrictions
established, we will have a maximum total sales value of $5,525. Now
You could easily change the values of the constraints and return to
perform the calculation with Solver to observe the behavior in the
sales.