Table of Contents |
You’ve learned about some basic features of spreadsheets. But a spreadsheet program is capable of a lot more, including automatically organizing data, hiding data, and calculations.
Technology: Why Employers Care |
Consider for a moment the types of questions you may have when looking at data in a budget or financial plan:
Whether you’re building a budget or a balance sheet, you’ll frequently need to add all the numbers in a row or column. Spreadsheets have formulas and commands to automatically add your data. A strong understanding of these functions can help you save time and be more productive. The easiest way to use this feature is the SUM button (also called AutoSum in certain programs).
fx | A | B |
---|---|---|
1 | Household Assets | Market Value |
2 | Primary residence | $0 |
3 | Automobile | $5,800 |
4 | Bicycle | $400 |
5 | Other | $500 |
6 | Furniture | $1,100 |
7 | Electronics | $1,800 |
8 | Other Household Items | $300 |
9 | Total | =SUM(B2:B8) |
fx | A | B |
---|---|---|
1 | Household Assets | Market Value |
2 | Primary residence | $0 |
3 | Automobile | $5,800 |
4 | Bicycle | $400 |
5 | Other | $500 |
6 | Furniture | $1,100 |
7 | Electronics | $1,800 |
8 | Other Household Items | $300 |
9 | Total | $9,900 |
In the table above, the formula in cell B9 is fixed unless the user decides to modify it. Changing a value in cells B2 through B8, however, will automatically update the total in cell B9. This illustrates the efficiency and flexibility of using formulas. They allow you to save time and make adjustments as necessary.
Spreadsheets are often used for calculating numbers using simple math. We just saw how the SUM command can be applied to the assets on a balance sheet. Spreadsheets can also help with net worth and financial ratio calculations.
Your net worth is the difference between your assets and liabilities. The math operation is subtraction. Let’s see how spreadsheets can help.
EXAMPLE
Cedric is using the following spreadsheet to compute his net worth. He can use the program’s subtraction formula to find the answer.fx | A | B |
---|---|---|
1 | Net Worth | Amount |
2 | Total Assets | $285,000 |
3 | Total Liabilities | $36,500 |
4 | Total Net Worth | =(B2–B3) |
fx | A | B |
---|---|---|
1 | Net Worth | Amount |
2 | Total Assets | $285,000 |
3 | Total Liabilities | $36,500 |
4 | Total Net Worth | $248,500 |
=MINUS(B2,B3)
The formula for addition, =SUM, works in a similar way to the formula for subtraction, =MINUS. The main difference is that arguments (cell addresses) can be in any order when performing addition. That is, =SUM(A1,A2) gives the same result as =SUM(A2,A1). The addition formula may also be written more simply as =(A1+A2) or =(A2+A1).
Recall that two measures of financial health from a balance sheet are the current ratio and the debt ratio. Let’s use a spreadsheet to find both.
Financial Ratio | Formula | Standard Benchmark |
---|---|---|
Current Ratio | Monetary Assets/Current Liabilities | Ratio > 1.0 or 100% |
Debt Ratio | Total Liabilities/Total Assets | Ratio < 0.40 or 40% |
EXAMPLE
Bonita is using the following spreadsheet to find her current ratio. She can use the program’s addition (+) and division (/) formulas to find the answer as shown.fx | A | B | C | D |
---|---|---|---|---|
1 | Monetary Asset | Value | Current Liability | Amount |
2 | Checking Account | $2,500 | Credit Cards | $1,800 |
3 | Savings Account | $7,000 | ||
4 | Total Assets | =(B2+B3) | ||
5 | Current Ratio | =(B4/D2) |
Finding the current ratio is a division problem. In spreadsheets, the forward slash (/) is the division sign and the formula is =DIVIDE with its arguments separated by a comma.
Bonita must divide all her monetary assets (checking and savings) by her current liability. She decides to find the ratio using two steps as shown in the table. Even though Bonita does not know the value of cell B4, she can still reference that cell in her division formula. That’s the power of spreadsheets! The result of Bonita’s calculation is below.
fx | A | B | C | D |
---|---|---|---|---|
1 | Monetary Asset | Value | Current Liability | Amount |
2 | Checking Account | $2,500 | Credit Cards | $1,800 |
3 | Savings Account | $7,000 | ||
4 | Total Assets | $9,500 | ||
5 | Current Ratio | 5.3 |
Bonita’s current ratio of 5.3 exceeds the standard benchmark of 1.0, so she’s doing well in regard to short-term debts.
fx | A | B | C | D |
---|---|---|---|---|
1 | Asset | Value | Liability | Amount |
2 | Monetary Assets | $9,500 | Credit Cards | $1,800 |
3 | Brokerage Acct. | $22,000 | Mortgage | $92,000 |
4 | Home | $161,000 | Car Loan | $0 |
5 | Automobile | $6,000 | Student Loan | $15,000 |
6 | Household Items | $14,000 |
Spreadsheet formulas are a useful tool to help you balance a monthly or annual budget. Just as you performed math operations on balance sheets, you can do the same for budgets and other financial plans. You’ve seen addition, subtraction, and division. Let’s add one more operator and formula to the mix: multiplication.
Each year, the purchasing power of our dollar is eroded by inflation. On average, inflation is about 2.5% to 3% every year. What happens if your employment income is unchanged year to year, but your expenses rise by 3%? That could throw your budget out of balance.
To visualize how inflation might affect an expense each year, you might apply a multiplier to your expense figures. Consider this example.
EXAMPLE
Hannah earns $41,300 a year from employment income. She’s new on the job so she isn’t expecting a raise next year. However, she knows some of her expenses will rise next year by 3% due to inflation. Hannah is curious whether her savings will erode in the upcoming year and by how much. Once she knows the answer, she can use her agility skill to make the necessary changes to stay on track.The table below shows the four expenses that Hannah expects to change in Year 2. An increase of 3% is represented by the multiplier 1.03. (You can use what you know about math to confirm this.) Notice the Year 2 increases in cells C4 through C7.
To find how much her savings will erode, Hannah developed the formula we see in cell C10. She really put her technology skills to work! She utilized a SUM command to total all her expenses in C4 through C9. By subtracting those expenses from her income in C2, Hannah can easily predict her Year 2 savings in cell C10.
fx | A | B | C |
---|---|---|---|
1 | Income | Year 1 | Year 2 |
2 | Employment | $41,300 | $41,300 |
3 | Expenses | Year 1 | Year 2 (Inflated) |
4 | Housing | $14,400 | =(B4*1.03) |
5 | Food | $12,700 | =(B5*1.03) |
6 | Utilities | $2,500 | =(B6*1.03) |
7 | Health Care | $2,800 | =(B7*1.03) |
8 | Transportation | $4,200 | $4,200 |
9 | Miscellaneous | $1,500 | $1,500 |
10 | Savings | $3,200 | =(C2–SUM(C4:C9)) |
11 | Total | $41,300 | $41,300 |
fx | A | B | C |
---|---|---|---|
1 | Income | Year 1 | Year 2 |
2 | Employment | $41,300 | $41,300 |
3 | Expenses | Year 1 | Year 2 (Inflated) |
4 | Housing | $14,400 | $14,832 |
5 | Food | $12,700 | $13,081 |
6 | Utilities | $2,500 | $2,575 |
7 | Health Care | $2,800 | $2,884 |
8 | Transportation | $4,200 | $4,200 |
9 | Miscellaneous | $1,500 | $1,500 |
10 | Savings | $3,200 | $2,228 |
11 | Total | $41,300 |
When budgeting, it’s often useful to see each expense as a function of your total expenses. That can tell you where a large percentage of your earnings are being allocated and help you make comparisons.
EXAMPLE
Ray senses he’s been spending a lot this year. But he needs a better visual of where his money is going. So, he turns to percentages. Ray will use the formulas for addition, multiplication, and division to show each expense as part of a whole.The table below shows three different, but related calculations. Follow the steps to see how Ray put his technology skills to work on his personal budget:
fx | A | B | C |
---|---|---|---|
1 | Annual Income | Dollars | ----- |
2 | Employment | $41,300 | $41,300 |
3 | Annual Expenses | Dollars | Percent |
4 | Housing | $14,400 | =(B4/B11*100) |
5 | Food | $12,700 | =(B5/B11*100) |
6 | Utilities | $2,500 | =(B6/B11*100) |
7 | Health Care | $2,800 | =(B7/B11*100) |
8 | Transportation | $4,200 | =(B8/B11*100) |
9 | Miscellaneous | $1,500 | =(B9/B11*100) |
10 | Savings | $3,200 | =(B10/B11*100) |
11 | Total | =SUM(B4:B10) | =SUM(C4:C10) |
After finding percentages, Ray could more clearly see that housing and food costs comprise the majority of his expenses. He decided to substitute home-cooked meals over takeout to try to curb expenses.
fx | A | B | C |
---|---|---|---|
1 | Annual Income | Dollars | ----- |
2 | Employment | $41,300 | $41,300 |
3 | Annual Expenses | Dollars | Percent |
4 | Housing | $14,400 | 35% |
5 | Food | $12,700 | 31% |
6 | Utilities | $2,500 | 6% |
7 | Health Care | $2,800 | 7% |
8 | Transportation | $4,200 | 10% |
9 | Miscellaneous | $1,500 | 3% |
10 | Savings | $3,200 | 8% |
11 | Total | $41,300 | 100% |
Source: THIS TUTORIAL HAS BEEN ADAPTED FROM LUMEN LEARNING’S “INTRODUCTION TO USING EXCEL” BY SHELLI CARTER. ACCESS FOR FREE AT courses.lumenlearning.com/suny-wm-compapp/chapter/introduction-using-excel. LICENSE: CREATIVE COMMONS ATTRIBUTION 4.0 INTERNATIONAL.