table of numbers arranged in rows and columns. Spreadsheets have long been used for accounting and financial calculations. Manual spreadsheet calculations can be time-consuming and tedious, especially when a change in a single number can affect results in many different rows and columns. Computer programs help greatly in performing spreadsheet calculations. Many software packages are now available that turn the computer into an electronic spreadsheet. Some of the popular spreadsheet packages are 1-2-3, and Microsoft’s Excel. These programs are excellent tools for a variety of what-if experiments, financial projections, and various accounting applications (preparation of consolidated financial statements, worksheets, special cost reports, and performance reports).
- accounting worksheet organized by rows and columns, providing a two-way system for analyzing related accounts. An organization’s income statement and balance sheet are based on data collected in this format. Spreadsheets also are used in security analysis to compare financial ratios and operating performance of similar companies. If used to post original account entries, it is a transaction journal or account ledger. Summary totals from these subsidiary ledgers are later posted to the general ledger. For example, a bank’s liability ledger listing commercial loans on the books might list all interest payments received and posted to the ledger, past due interest, noninterest expense, and noninterest income.
- electronic spreadsheet, often used as a forecasting tool to project the impact of interest rate changes on a deposit or loan portfolio during future time periods, and test various what-if hypotheses or interest rate scenarios in each of those periods. Because of its flexibility, computer simulation based on spreadsheet modeling has become an important part of budgeting, financial planning, and Asset-Liability Management. See also what-if calculation.
table of numbers arranged in rows and columns, related by formulas. Spreadsheet calculations can be very tedious. Changing a single number can affect the results in many different rows and columns. Therefore, it helps greatly to have a computer perform spreadsheet calculations. Microsoft Excel is a commonly used spreadsheet program.
a table of numbers arranged in rows and columns. Paper spreadsheets were used for business data long before computers were invented. The first computer spreadsheet was VisiCalc, used on the Apple II computer in the late 1970s. Recently the most popular spreadsheets have been Lotus 1-2-3 and Excel. Here are some general features of these programs:
- Data is arranged in rows (labeled with numbers) and columns (labeled with letters). Each location in the spreadsheet is called a cell.You can enter numbers or letters in a cell, as in this example, which records the sales of different types of products at a small store:
- The computer will do calculations automatically if you enter formulas. For example, to calculate the revenue from the sale of cereal, enter the formula +B2*C2 in cell D2. (The asterisk * represents multiplication; the initial plus sign indicates this is a formula and not a label. In Excel, an equal sign is put at the start of a formula.)
When a formula is entered, the spreadsheet will display the result of the formula, not the formula itself, in that cell.However,moving the cell pointer to a cell will let you see the formula for that cell at the top of the screen, and you can edit it if needed.
- A formula in one cell can be copied to other cells. For example, the formula in cell D2 can be copied to cells D3 and D4, which will give the total revenue for the other products:
The copy command automatically changes formulas when they are copied to new cells. In the preceding example, when you copy the formula +B2*C2 from cell D2 to cell D3, it will become the formula +B3*C3, and in cell D4 it will become +B4*C4. This is because B2 and C2 in the formula in the original cell (D2) were written in the form of a relative address. See absolute address to learn how to prevent the cell addresses from being changed by the copy command.
- A formula can contain built-in functions, such as a command to sum all cells in a range. Entering the Lotus 1-2-3 formula @SUM(D2..D4) or the Excel formula =SUM(D2:D4) into cell D5 will automatically calculate the column total (cells D2, D3, and D4). Many such functions are included with spreadsheet programs.
- Spreadsheets are especially valuable because the formulas will be automatically recalculated whenever one of the numbers is changed. For example, if later in the month you update your sales figures, the program will automatically recalculate the revenue for each item, and the total revenue. This makes spreadsheets especially useful for “what-if” analysis.You can design a spreadsheet with many variables, and see how the result changes when one or more of those variables are changed.
- Spreadsheets can automatically create graphs of your data. For example, Figure 251 shows a pie chart giving the fraction of the sales of each item. Graphs can also illustrate how a variable changes with time, or how two variables are related to each other.
- macros can be used to combine a series of keystrokes into one command, and advanced macros are themselves computer programs that can interact with users and process data.
- Modern spreadsheets have added many features to improve the appearance of the output. For example, some cells can be displayed in boldface type, or a cell can be emphasized with shading.
- Originally, spreadsheets were two-dimensional, making them analogous to putting all of your work on one giant piece of paper. Later spreadsheets added three-dimensional capability, which is analogous to keeping your work on different pages in a notebook. In that case a cell address could be written as C:B1, meaning page C, column B, row 1. Also, modern spreadsheets allow different worksheets to be automatically linked together. For example, you can put your monthly sales figures in 12 different worksheets, and then have those linked to a single spreadsheet with year-end summary data.
ledger sheet on which a company’s financial statements, such as balance sheets, income statements and sales reports, are laid out in columns and rows. Spreadsheets are used by securities and credit analysts in researching companies and industries. Since the advent of personal computers, spreadsheets have come into wide use, because software makes them easy to use. In an electronic spreadsheet on a computer, any time one number is changed, all the other numbers are automatically adjusted according to the relationships the computer operator sets up. For instance, in a spreadsheet of a sales report of a company’s many divisions, the updating of a single division’s sales figure will automatically change the total sales for the company, as well as the percentage of total sales that division produced.
risk management tool to determine risk exposure and to help spread the risk. A risk manager considers a business firm’s individual exposures separately. As the number of exposures increases, the threat that all units will suffer loss decreases, and the manager is able to spread the risk.