After a nice weekend of rest, I spent time today learning about financial analysis in Microsoft Excel.
I began today by working with the What-If Analysis. The What-If Analysis can manage possible scenarios for a given situation. The Scenario Manager tool can store information for a hypothetical scenario in which values for a formulas would need to be changed. For example, the hypothetical scenario could be that one’s income has changed, but the individual’s income is part of several formulas in an Excel worksheet. One can input the amount of the hypothetical change in income into the Scenario Manager and tell Excel to evaluate the scenario, which would bring to attention all of the changes that could result from that hypothetical scenario. There is also a What-If Analysis tool called Goal Seek. This tool can find a solution to a set of conditions that the user sets. For instance, Goal Seek can find an interest rate that works for a loan amount, length of the loan, and how much one wishes to pay per month.
I also saw more applications of a PivotTable today. When I first learned about PivotTables last Thursday, I was confused about how they worked and the purpose of using one. The videos that I watched today went back to PivotTables, and everything suddenly made sense. I now realize how powerful a PivotTable actually is, and how it can help someone quickly make sense of a lot of information. Because all of the learning is at my own pace, and because my expectations are not to zoom through the courses as fast as possible, I created my own sample income statement to practice creating a table in Excel, and I spent some time playing around with the PivotTable functions and the several possible views one can choose.
Another concept that I learned today was common-sizing, and it is specifically related to finance. Common-sizing is the practice of mathematically converting financial data into information that can be compared across companies of all types and sizes. The online videos taught me about performing common-size analysis with sample income statements and balance sheets. Such common-size analysis may include comparing the percent of operating income or comparing the percent of liabilities between two companies. Common-size analysis makes sense because one only evaluates financial metrics that involve a percent, and can therefore apply this type of analysis to companies of different sizes. I also learned basic formulas to use for common-sizing analysis when working in Microsoft Excel, as well as the formulas’ uses and purposes.
Although I have learned a lot over these past few days, I am by no means proficient with Microsoft Excel. However, I am learning enough to recognize features and follow guided practices with the video courses. I am also trying to practice some of the features on my own, like I did with the PivotTables. I know that I still have a lot to learn, and for the purposes of this intensive, I am only focusing on features that pertain to basic finance.
I also realized that there were several concepts that I was able to better understand when they were presented a second time. I said this about PivotTables in one of the paragraphs above, but the same thing happened for tracing precedents/dependents, data validation, and adding filters to data. Seeing features more than once was helpful, allowing me to gain a more complete understanding of the tool being taught after getting an introduction the first time that I learned about it.
Tomorrow, I will be back at school, working with Mrs. Spurgeon to begin making my financial model. I hope that everything I’ve learned about Microsoft Excel beginning last week will be put to good use during these next several building days!
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