Question

Using What-If Analysis"

• 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

Answer to the above question:

Some of the what-if analyses that an accountant uses to measure a firm's performance of appropriate are:

A) scenarios

B) goal seek

C) data tables

D) solver add-in

A brief discussion on the above points is mentioned below:

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

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

C) 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.

D) 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/she use the solver add-in.