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Chapter 26. Using Excel in a Workgroup > Storing Multiple Scenarios in a Single...

Storing Multiple Scenarios in a Single Workbook

One of Excel's most valuable hidden features is its capability to store multiple scenarios within a single workbook. Creating scenarios helps you plan for a future in which you can't be certain that your worksheet model is accurate, especially when a change in one assumption will have a ripple effect on other values that affect the bottom line. Scenarios are useful in these two circumstances:

  • When the underlying assumptions depend on external factors out of your control, such as the weather or the economy. For example, if you sell heating oil or umbrellas, you might create a P&L forecast using multiple scenarios to compare the results of strong sales in cold, wet weather and weak sales if the winter is mild.

  • When you want to perform what-if analyses that test the bottom-line effect of price increases or capital expenditures. For instance, the classic demand curve from Econ 101 says that raising prices past a certain point might reduce demand so much that profits actually suffer, whereas cutting prices might cause sales to grow tremendously and swell the bottom line. Use scenarios in combination with market research to test the bottom-line impact of a 10% price cut, a 5% price hike, and a 10% increase.


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