Question

Accountants are counted on to provide management with analyzing data to determine best- and worst-case scenarios. As future planning becomes more complex, these what-if analyses can increase in complexity and usefulness. Identify and discuss at least three (3) types of what-if analyses that an accountant should be able to perform to measure a firm’s performance over a period. Be sure to include the type of data that will be needed to support this analysis. Justify your response.

Answer 1

Solution:

The types of what-if analyses that an accountant should be able to perform to measure a firm’s performance over a period are:

1) scenarios

2) goal seek

3) data tables

4) solver add-in

1) Scenarios: If what wants to analyse more then two variables then he can use scenarios. A scenario can have a maximum of 32 values but one can create as many scenarios as he wants.

2) Goal seek: goal seek works with only one variable input value. If one knows the result that he want from a formula but he is not sure what input value the formula require to get the result then he can use the goal seek feature.

3) Data tables: a data table works with only one or two types of variables but it can accept different values for those variables. Data table makes it easy to examine a range of possibilities at a glance. Because one focuses on only one or two variables, results are easy to read and share in tabular form.

4) Solver add-in: if one wants to determine more than one input value, for example, the loan amount and the monthly payment amount for a loan, he use the solver add-in.