CHAPTER FIFTEEN
Measurement Analysis with an Electronic Spreadsheet*
THERE ARE SEVERAL TOOLS used to conduct financial analysis. One is a database of accounting information, in which an analyst can roam for days, tracking down the details regarding when specific transactions have taken place, why they occurred, and the likelihood of their happening again. Analysts rarely descend straight into the depths of the accounting database, however, without first using some more simple means for determining what problem has arisen, which yields clues regarding where in the database to search. This higher-level information is obtained by using ratio and trend analysis to pinpoint the issue. To get this information, a calculator, pencil, and paper are sufficient, but also very time consuming and prone to error. An electronic spreadsheet instead is the best method. In this chapter, we review how to use such a spreadsheet—in this case, the Microsoft Excel spreadsheet, version 2000.
The formulas presented in this chapter are by no means difficult. The discussion is confined to the simplest and most understandable spreadsheet commands, and avoids the use of complicated macros. The discussion focuses on using spreadsheets for five types of analysis: financial statements, project analysis, investment analysis, risk analysis, and trend analysis. In each case, it is noted how Excel can be used to solve a problem, and then a sample situation is provided.
A key issue noted throughout this chapter is ...
