Home > Store

Business Analysis with Microsoft Excel, (Adobe Reader), 3rd Edition

Register your product to gain access to bonus material or receive a coupon.

Business Analysis with Microsoft Excel, (Adobe Reader), 3rd Edition

eBook (Watermarked)

  • Sorry, this book is no longer in print.
  • About Watermarked eBooks
  • This PDF will be accessible from your Account page after purchase and requires PDF reading software, such as Acrobat® Reader®.

    The eBook requires no passwords or activation to read. We customize your eBook by discreetly watermarking it with your name, making it uniquely yours.

    Watermarked eBook FAQ

Not for Sale

Description

  • Copyright 2008
  • Pages: 504
  • Edition: 3rd
  • eBook (Watermarked)
  • ISBN-10: 0-7686-7503-0
  • ISBN-13: 978-0-7686-7503-0

Whether you own a small business or work for a large corporation–whether you are looking for help making financial and business decisions–this book is for you.  Business Analysis with Microsoft® Excel, Third Edition, provides in-depth information that will streamline your use of the tools within Excel. Professional advice and guidance from an experienced author provide the answers to your most pressing questions:

     •    What’s the relationship between my cost of goods sold and my inventory?

     •    How do I get Excel to keep these values up-to-date on my income statement and my balance sheet?

     •    I have to track service quality over time. How can I automate that using Excel charts?

     •    How can I forecast future demand for my products, based on prior sales results?

     •    What’s the difference between financial leverage and operating leverage? How do I calculate them using my financial records?

     •    I need to project my financials for next year. Does Excel have a tool for that? What do I need to know to use it effectively?

     •    How do I do all these things using the new Ribbon in Excel 2007?

     •    What are the best ways to automate a connection between Excel and an external database?

Category  Spreadsheets

Covers    Applicable for versions of Microsoft Excel 97 to 2007

User Level    Intermediate–Advanced

More great stuff… is just a click away!

     •    Sample journals and ledgers; examples of trial balances, income statements, and balance sheets

     •    Custom functions, such as FIFO and LIFO, for inventory management

     •    VBA routines that automate the creation of forecasts, quality control charts, and sales and marketing analysis

     •    Statistical process control charts: P charts, X-and-S charts, X-and-MR charts

     •    Forecasting tools: Seasonal smoothing and ARIMA model identification

quote from the front cover

“Conrad takes the time to give the readers an easy-to-follow step-by-step understanding of the material, accompanied by clear illustrations, making this an excellent book to learn the material. I recommend this book to anyone wanting to gain more expertise in using and manipulating business data from within Excel.”

–Bob Umlas, Excel MVP

Sample Content

Table of Contents

Introduction............................................................................................... 1

    Taking It on Faith.............................................................................. 2

    About the Platform............................................................................ 3

    How This Book Is Organized............................................................. 4

    Two Special Skills: Named Ranges and Array Formulas..................... 4

        Assigning Names....................................................................... 5

        Using Array Formulas................................................................ 6

    Conventions Used in This Book......................................................... 6

     I  Analyzing Financial Statements

1  Working with Income Statements......................................................... 11

    Keeping Score................................................................................. 11

        Choosing the Right Perspective................................................. 12

        Defining Two Purposes for Accounting...................................... 12

    Using the Income Statement.............................................................. 13

        Choosing a Reporting Method.................................................. 13

        Measuring the Operating and Nonoperating Segments............... 17

    Moving from the General Journal to the Income Statement................. 18

        Getting the General Journal into Excel........................................ 18

        Understanding Absolute, Relative, and Mixed References.......... 19

        Getting the Journal Data to the Ledger...................................... 20

        Getting the Ledger Data to the Income Statement..................... 23

    Managing the Financial Analyses with Accrual Accounting................ 24

    Organizing with Traditional vs. Contribution Approaches.................. 29

    Summary......................................................................................... 30

2  Balance Sheet: Current Assets............................................................. 31

    Designing the Balance Sheet............................................................. 32

        Understanding Balance Sheet Accounts.................................... 32

        Understanding Debit and Credit Entries.................................... 33

    Getting a Current Asset Cash Balance.............................................. 34

        Using Sheet-Level Names........................................................ 35

        Getting a Cash Balance for Multiple Cash Accounts................. 37

        Handling Restricted Cash Accounts.......................................... 39

    Getting a Current Asset Accounts Receivable Balance....................... 40

        Allowing for Doubtful Accounts............................................... 41

        Using the Aging Approach to Estimating Uncollectibles............. 42

        Using the Percentage of Sales Approach to Estimating Uncollectibles 44

    Getting a Prepaid Expenses Balance................................................. 44

        Dealing with Insurance as a Prepaid Expense............................ 45

    Getting a Current Asset Balance....................................................... 47

        Understanding the Inventory Flow............................................ 48

        Closing the Inventory Account................................................. 48

        Closing the Revenue and Expense Accounts............................. 49

    Summary......................................................................................... 50

3  Valuing Inventories for the Balance Sheet............................................. 51

    Valuing Inventories.......................................................................... 51

        Using Specific Identification..................................................... 52

        Using Average Cost................................................................. 58

        Using FIFO............................................................................. 62

        Using LIFO............................................................................. 69

    Comparing the Four Valuation Methods........................................... 70

    Handling Purchase Discounts........................................................... 72

    Using Perpetual and Periodic Inventory Systems............................... 73

    Calculating Turns Ratios................................................................... 75

    Summary......................................................................................... 77

4  Summarizing Transactions: From the Journals to the Balance Sheet....... 79

    Understanding Journals.................................................................... 80

        Understanding Special Journals................................................ 81

        Structuring the Special Sales Journal......................................... 81

        Structuring the Special Purchases Journal................................. 83

        Building Dynamic Range Names............................................... 83

        Using Dynamic Range Names in the Journals............................ 85

        Structuring the Cash Receipts Journal....................................... 86

        Structuring the Cash Payments Journal..................................... 88

    Understanding Ledgers.................................................................... 89

        Creating the General Ledger.................................................... 90

        Creating Subsidiary Ledgers.................................................... 92

        Automating the Posting Process............................................... 93

        Opening the Workbooks....................................................... 100

    Getting a Current Liabilities Balance............................................... 102

    Summary....................................................................................... 103

5  Working Capital and Cash Flow Analysis........................................... 105

    Matching Costs and Revenues....................................................... 105

    Broadening the Definition: Cash vs. Working Capital...................... 107

        Determining the Amount of Working Capital........................... 108

        Determining Changes in Working Capital................................ 113

    Analyzing Cash Flow..................................................................... 116

        Developing the Basic Information........................................... 118

        Summarizing the Sources and Uses of Working Capital.......... 120

        Identifying Cash Flows Due to Operating Activities................. 121

        Combining Cash from Operations with Cash from Nonoperating Transactions            122

    Summary....................................................................................... 123

6  Statement Analysis............................................................................. 125

    Understanding a Report by Means of Common-Sizing.................... 126

        Using Common-Sized Income Statements.............................. 126

        Using Common-Sized Balance Sheets.................................... 128

        Using Comparative Financial Statements................................ 129

    Using Dollar and Percent Changes in Statement Analysis................ 131

        Assessing the Financial Statements......................................... 132

        Handling Error Values............................................................ 133

        Evaluating Percentage Changes.............................................. 134

    Common-Sizing for Variance Analysis............................................ 135

    Common-Sizing by Headcount....................................................... 139

    Summary....................................................................................... 141

7  Ratio Analysis.................................................................................... 143

    Interpreting Industry Averages and Trends..................................... 144

        Comparing Ratios Within Industries........................................ 145

        Analyzing Ratios Vertically and Horizontally........................... 146

        Getting a Basis for Ratios....................................................... 147

    Analyzing Profitability Ratios.......................................................... 150

        Finding and Evaluating Earnings Per Share.............................. 150

        Determining Gross Profit Margin............................................ 151

        Determining Net Profit Margin............................................... 153

        Determining the Return on Assets (ROA)............................... 154

        Determining the Return on Equity (ROE)................................ 155

    Analyzing Leverage Ratios............................................................. 156

        Determining the Debt Ratio.................................................... 157

        Determining the Equity Ratio.................................................. 157

        Determining the Times Interest Earned Ratio........................... 158

    Analyzing Liquidity Ratios.............................................................. 159

        Determining the Current Ratio................................................ 159

        Determining the Quick Ratio.................................................. 160

    Analyzing Activity Ratios................................................................ 161

        Determining the Average Collection Period............................. 161

        Determining Inventory Turnover............................................. 162

    Summary....................................................................................... 163

    II  Financial Planning and Control

8  Budgeting and Planning Cycle............................................................ 167

    Creating Pro Forma Financial Statements....................................... 167

        Forecasting by Percentage of Sales........................................ 169

        Performing Sensitivity Analysis............................................... 175

    Moving from the Pro Forma to the Budget..................................... 176

        Projecting Quarterly Sales...................................................... 176

        Estimating Inventory Levels.................................................... 177

        Fitting the Budget to the Business Plan.................................... 180

    Summary....................................................................................... 181

9  Forecasting and Projections............................................................... 183

    Making Sure You Have a Useful Baseline...................................... 184

    Moving Average Forecasts............................................................ 185

        Creating Forecasts with the Moving Average Add-In............. 188

        Dealing with the Layout of Excel’s Moving Averages.............. 189

        Creating Moving Average Forecasts with Excel’s Charts........ 190

    Forecasting with Excel’s Regression Functions............................... 192

        Making Linear Forecasts: The TREND Function.................... 192

        Making Nonlinear Forecasts: The GROWTH Function........... 194

        Creating Regression Forecasts with Excel’s Charts................. 198

    Forecasting with Excel’s Smoothing Functions................................ 199

        Projecting with Smoothing...................................................... 199

        Using the Exponential Smoothing Add-In............................... 200

        Choosing a Smoothing Constant............................................. 202

        Making Smoothed Forecasts Handle Seasonal Data............... 204

    Using the Box-Jenkins ARIMA Approach: When Excel’s Built-In Functions Won’t Do     206

        Understanding ARIMA Basics............................................... 207

        Charting the Correlograms..................................................... 208

        Starting with Correlograms to Identify a Model....................... 208

        Identifying Other Box-Jenkins Models.................................... 210

    Summary....................................................................................... 212

10. Measuring Quality............................................................................ 215

    Monitoring Quality Through Statistical Process Control................... 215

        Using Averages from Samples................................................ 216

        Using X-and-S Charts for Variables....................................... 217

        Interpreting the Control Limits................................................ 220

        Using P-Charts for Dichotomies............................................. 224

        Choosing the Sample Size...................................................... 226

        Determining That a Process Is Out of Control......................... 227

        Using X-and-MR Charts for Individual Observations.............. 231

        Creating SPC Charts Using Excel.......................................... 231

    Performing Acceptance Sampling................................................... 234

        Charting the Operating Characteristic Curve........................... 235

    Using Worksheet Functions for Quality Control.............................. 240

        Sampling Units from a Finite Population.................................. 240

        Sampling Units from a Nonfinite Population............................ 242

        Sampling Defects in Units....................................................... 244

        Using the CRITBINOM Function.......................................... 246

    Summary....................................................................................... 250

  III  Investment Decisions

11. Examining a Business Case: Investment............................................ 253

    Developing a Business Case........................................................... 253

        Getting Consensus for the Plan............................................... 254

        Showing Your Work............................................................. 256

    Developing the Excel Model.......................................................... 257

    Summary....................................................................................... 264

12. Examining Decision Criteria for a Business Case............................... 265

    Understanding Payback Periods..................................................... 265

    Understanding Future Value, Present Value, and Net Present Value 270

        Calculating Future Value........................................................ 270

        Calculating Present Value....................................................... 270

        Calculating Net Present Value................................................ 271

    Shortening the Payback Period...................................................... 273

    Summary....................................................................................... 277

13. Creating a Sensitivity Analysis for a Business Case........................... 279

    Reviewing the Business Case......................................................... 279

    Managing Scenarios....................................................................... 280

        Saving a Scenario for the Base Case...................................... 282

        Developing Alternative Scenarios........................................... 284

        Developing Scenarios That Vary Expenses............................. 286

        Summarizing the Scenarios..................................................... 287

    Measuring Profit............................................................................ 288

        Calculating Internal Rate of Return......................................... 288

        Calculating Profitability Indexes.............................................. 290

        Estimating the Continuing Value.............................................. 291

    Varying the Discount Rate Input..................................................... 292

    Using the Goal Seek Tool.............................................................. 294

    Summary....................................................................................... 296

14. Planning Profits................................................................................ 297

    Understanding the Effects of Leverage............................................ 297

    Analyzing Operating Leverage........................................................ 298

        Planning by Using the DOL.................................................... 307

    Analyzing Financial Leverage......................................................... 308

        Determining the Debt Ratio.................................................... 309

        Determining the Times Interest Earned Ratio........................... 310

    Summary....................................................................................... 310

15. Making Investment Decisions Under Uncertain Conditions................ 311

    Using Standard Deviations............................................................. 311

    Understanding Confidence Intervals............................................... 315

        Using Confidence Intervals in a Market Research Situation..... 315

        Refining Confidence Intervals................................................. 318

    Using Regression Analysis in Decision Making................................ 319

        Regressing One Variable onto Another................................... 319

        Avoiding Traps in Interpretation: Association vs. Causation..... 325

        Regressing One Variable onto Several Other Variables: Multiple Regression  326

        Estimating with Multiple Regression........................................ 334

    Summary....................................................................................... 338

16. Fixed Assets.................................................................................... 339

    Determining Original Cost.............................................................. 339

        Determining Costs................................................................. 340

        Choosing Between Actual Cost and Replacement Cost.......... 341

    Depreciating Assets....................................................................... 342

        Using Straight-Line Depreciation............................................ 344

        Using the DB Function........................................................... 345

        Using the DDB Function to Calculate Depreciation................. 348

        Using Variable Declining Balance Depreciation....................... 349

        Using Sum-of-Years’-Digits Depreciation.............................. 351

    Summary....................................................................................... 352

  IV  Sales and Marketing

17. Revenue Recognition and Income Determination............................... 355

    Revenue Recognition in Theory...................................................... 355

    The Earning Process...................................................................... 356

    Recognizing Revenue During Production......................................... 358

        Using the Percentage of Completion Method.......................... 358

        The Completed Contract Method.......................................... 360

    Recognizing Revenue at Completion of Production......................... 360

    Recognizing Revenue with the Point of Sale Method....................... 361

        Making Sales on Credit......................................................... 362

        Incurring Costs After the Point of Sale.................................... 363

        Allowing for Return Privileges................................................ 363

    Recognizing Revenue During the Cash-Collection Process.............. 364

        Using the Installment Method................................................. 364

        Using the Cost Recovery Method.......................................... 365

    Recognizing Revenue in Different Industries.................................... 366

        Recognizing Revenue in Service Industries.............................. 366

        Recognizing Revenue in Manufacturing Industries.................... 366

    Understanding the Impact of Revenue-Recognition Methods........... 366

    Summary....................................................................................... 367

18. Importing Business Data into Excel................................................... 369

    Creating and Using ODBC Queries................................................ 370

        Preparing to Import Data....................................................... 370

        Specifying Data Sources........................................................ 371

        Creating Queries with the Query Wizard................................ 374

        Creating Queries with Microsoft Query.................................. 377

        Creating Parameterized Queries in Microsoft Query............... 380

        Using Joins in Microsoft Query.............................................. 380

    Working with External Data Ranges............................................... 381

        Managing Security Information............................................... 382

        Arranging Automatic Refreshes.............................................. 384

        Setting Other Data Range Options......................................... 385

        Importing Data to Pivot Tables and Charts............................. 385

    Creating and Using Web Queries................................................... 389

    Using Parameterized Web Queries................................................. 391

    Using VBA to Update an External Database.................................. 393

        Structuring the Worksheet...................................................... 394

        Editing the Record’s Values................................................... 395

        Adding New Records to the Recordset.................................. 399

        Choosing to Use DAO.......................................................... 401

    Updating the Database Using ADO................................................ 402

        Choosing to Use ADO.......................................................... 402

        Using ADO to Update a Database......................................... 403

    Summary....................................................................................... 406

19. Analyzing Contributions and Margins................................................ 407

    Calculating the Contribution Margin................................................ 408

    Using Unit Contribution.................................................................. 411

        Increasing the Contribution Margin......................................... 412

        Creating an Operating Income Statement................................ 413

    Finding the Break-Even Point......................................................... 413

        Calculating Break-Even in Units............................................. 414

        Calculating Break-Even in Sales............................................. 415

        Calculating Break-Even in Sales Dollars with an Expected Level of Profit       416

        Charting the Break-Even Point............................................... 417

        Choosing the Chart Type....................................................... 419

    Making Assumptions in Contribution Analysis................................. 421

        Linear Relationships............................................................... 421

        Assignment of Costs.............................................................. 422

        Constant Sales Mix................................................................ 422

        Worker Productivity.............................................................. 422

    Determining Sales Mix................................................................... 423

    Analyzing Segment Margin............................................................. 424

    Summary....................................................................................... 425

20. Pricing and Costing.......................................................................... 427

    Using Absorption and Contribution Costing.................................... 428

        Understanding Absorption Costing......................................... 428

        Understanding Contribution Costing....................................... 433

        Applying the Contribution Approach to a Pricing Decision...... 436

    Using Contribution Analysis for New Products............................... 438

        Allocating Expenses to Product Lines..................................... 440

        Varying the Inputs.................................................................. 441

    Estimating the Effect of Cross-Elasticity.......................................... 442

    Summary....................................................................................... 444

Appendixes

A What’s on the Web Site?................................................................... 449

B  Glossary............................................................................................ 451

0789736640, TOC, 5/22/2007

Updates

Submit Errata

More Information

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020