How can you Create and Manage Scenarios in Excel?

When it comes to performing what-if analysis, Excel offers a powerful tool called “Scenario Manager.” Scenarios are sets of values that Excel saves and can substitute automatically in your worksheet. This feature allows you to create multiple scenarios and compare them to see how different inputs affect the outcomes. In this comprehensive guide, we’ll walk you through the steps to create and manage scenarios in Excel.

Step 1: Prepare Your Data

Before you start using Scenario Manager, ensure your data is well-organized. Typically, you would have constants and formulas set up in your spreadsheet.

Example Layout:

• A1: Sales
• A2: Costs
• A3: Profit
• B1: 50000 (Sales Value)
• B2: 30000 (Costs Value)
• B3: =B1-B2 (Profit Formula)

Step 2: Open Scenario Manager

1. Go to the Data tab on the Ribbon.
2. In the Forecast group, click on What-If Analysis.
3. Select Scenario Manager from the drop-down menu.

Step 3: Add a New Scenario

1. In the Scenario Manager dialog box, click Add.
2. Scenario Name: Give your scenario a descriptive name (e.g., “Best Case”).
3. Changing Cells: Select the cells that you want to change (e.g., B1 and B2 for Sales and Costs respectively).
4. Click OK.

Step 4: Enter Scenario Values

1. In the Scenario Values dialog box, input the values for Sales and Costs for the “Best Case” scenario (e.g., 60000 for Sales and 25000 for Costs).
2. Click OK.

Step 5: Add Additional Scenarios

Repeat Step 3 and Step 4 to add more scenarios (e.g., “Worst Case” and “Most Likely Case”).

1. For “Worst Case,” enter values like 40000 for Sales and 35000 for Costs.
2. For “Most Likely Case,” enter values like 55000 for Sales and 28000 for Costs.

Step 6: Display a Scenario

1. In the Scenario Manager dialog box, select the scenario you want to display (e.g., “Best Case”).
2. Click on the Show button.
3. Observe how the values for Sales, Costs, and Profit change according to the selected scenario.

Step 7: Generate a Summary Report

1. While still in the Scenario Manager dialog box, click on the Summary button.
2. Choose the type of report you want (e.g., Scenario Summary).
3. Result Cells: Select the cell or cells that contain formulas for which you want to see the results (e.g., B3 for Profit).
4. Click OK.

Excel will generate a new worksheet with a detailed summary report comparing each scenario.

Step 8: Edit a Scenario

1. In the Scenario Manager dialog box, select the scenario you want to edit.
2. Click on the Edit button.
3. Make any necessary changes to the name, changing cells, or scenario values.
4. Click OK to save changes.

Step 9: Delete a Scenario

1. In the Scenario Manager dialog box, select the scenario you want to delete.
2. Click on the Delete button.
3. Confirm the deletion by clicking OK.

Practical Applications of Scenario Manager

1. Budget Planning: Compare different budget scenarios to see how various expenditures will affect your bottom line.
2. Sales Forecasting: Evaluate how different sales numbers will impact your profit and revenue.
3. Project Management: Plan for best-case, worst-case, and most likely scenarios to better manage project risks.

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