Introduction
A computer is a type of information system that enables users to process data into information. Computers are defined by the applications they support, and businesses are turning into such programs to easily manage organizational data. A spreadsheet is an application that performs functions similar to an accounting worksheet. Excel is an example of spreadsheet software supplied by Microsoft, thus enabling individuals and organizations to manage their data through financial calculations. Therefore, this paper provides a description of the Excel spreadsheet tool and the relevant applications of spreadsheets in finance, marketing, and accounting activities.
Description of Excel Spreadsheet
Excel is spreadsheet software that enables users to perform calculations in rows and columns. It also contains graphing tools, charts, and a programming language known as VB for Applications. The application is a component of Microsoft Office. The present releases are Excel 2010 for Windows and Excel 2011 for Mac. Excel enables users to design tables and financial statements by supplying data and functions into rows and columns. One application of Excel is the management of finances. This is because Excel contains in-built functions and various mathematical formulas (FunctionX par.3).
Microsoft excel has the fundamental characteristics of all spreadsheets. It has rows and columns and in-built functions supplied to deal with statistical, financial, and business requirements. In addition, the graph tool presented in Excel enables users to analyze information within a worksheet, and with various graphical displays. VB for Applications is a tool that allows users to implement different numerical functions, for example, for solving accounting problems of financial systems, and then presenting the solutions to the spreadsheet.
Excel can also be thought of as a decision support system (DSS) because of tools like stock analyzers, which provide answers and reports based on user responses. Moreover, an Excel program can import data from other databases, analyze the data, make a Word report or presentation, and send these reports regularly to the expected parties (Harvey 32).
The following paragraphs outline the features of spreadsheet applications.
Spreadsheet Organization
A spreadsheet contains over 1, 000 related worksheets. Each worksheet holds more than 16, 000 columns and approximately one million rows. Columns are identified by letters and rows by numbers. Only a small section of the worksheet can be displayed on the screen, and it requires scrolling over the worksheet to access different parts.
The connection between a row and a column is known as a cell. According to Shelly et al., a single worksheet holds over 17 billion cells, which represent sections for data entry. Cells are identified by their relevant columns and rows (115). For instance, the intersection of column C and row 3 is represented as cell C3. Cells can have labels, numbers, and functions supplied by the user. Labels help in worksheet organization. Using descriptive text, such as Income and Expenses, ensure that worksheets are readable.
Calculation
Worksheets use values in calculations, and other cells may contain formulas or functions that return values. A formula is a function that performs calculations and returns the result in a cell, generally the cell holding the formula. Users create their own formulas when using excel. However, there are inbuilt functions that perform calculations; they include formulas for sum, average, date, interest rate, and logical notations.
Recalculation
The ability to recalculate data when supplied in the worksheet is an important feature of a spreadsheet application. Excel automatically changes values in cells using cell references, provided that correct formulas and functions are used. This feature is also helpful in forecasting and decision-making. In most cases, a what-if analysis tool is an excellent approach to enlightening the effects of changes made within a worksheet. This is helpful in financial decision-making and budgeting.
Charting
Charting capability enables users to present their data in graphical form. A visual representation makes it easy for people to understand the concept behind the work she. da ta.A virtual representation of data through charts often makes it easier to analyze and interpret information. The three common charts in a spreadsheet application, such as Excel, are line charts, column charts, and pie charts. A line chart is used for depicting trends in specific periods.
For instance, a line chart could represent the income for each of the twelve months. A column chart depicts worksheet data in form of bars. For example, a 3-D column chart may be used to represent the expenses and savings of the four weeks in each month. A pie chart represents the percentages of each item on a round chart, which contribute to the total value. In essence, when data is modified in a worksheet, the changes are automatically reflected on the chart (Shelly et al. 116).
Benefits of Excel Spreadsheet
The benefits of Excel san spreadsheet can be attributed to the inbuilt formulas, functions, automatic formatting, and graphing features. Built-in formulas enable users to easily perform calculations of complex tasks. The recalculation and automatic formatting features help users to actively create and alter data in a worksheet. The graphing feature helps in the easy representation of data.
From the analysis of the spreadsheet feature, the following are specific benefits that can be realized from using the application:
- data entry – a spreadsheet only requires a single entry to determine other cells’ entry. In excel, a user is able to correct errors once, and the changes are reflected on the rest of the spreadsheet. A device such as a calculator requires data to be entered one at a time;
- data analysis – excel enables uses to format data on a single sheet and consequently perform analysis manually or through tools like the Analysis Toolpack. This is easy as compared to written calculations;
- data sorting – spreadsheets enable users to group and re-group data based on specific criteria. For instance if you want to sort data in relation to annual expenses, you only need to trigger the sort function and excel formats the data you need; and
- projections – excel allows uses to enter and retrieve data for later use. Data can also be added on the existing worksheet and using the what-if analysis, projections can be made (Root par.4).
Applications of Spreadsheets
Business activities are the general economic functions such as buying, leasing, investing, and selling carried out by a firm. A business activity can be done manually or electronically using computers. When a business activity is performed using information systems, it is termed as a component of information technology infrastructure (Laudon & Laudon, 32). In older days, organizations relied on manual efforts in carrying out business activities. But nowadays tools like Excel spreadsheet have changed the way firms operate. Spreadsheets are important in making decisions about purchasing, selling, renting, or even investing. It is now essential to use such tools because business activities are the core driver of organizational strategy which requires a lot of concern.
The applications of spreadsheets in business can be classified in different categories. The first classification is application software, where business application designers create spreadsheet to be used by end users. Despite the wide usage of programming languages in designing application software, some programmers choose to design applications using spreadsheets. For example, Excel can be used as client software that accepts data from users and export the information to an application database for analysis purposes. As a decision support system, Excel can be used to manage prices and inventory more efficiently during the product life-cycle. This helps a firm to increase profitability (Harvey, 15).
The second category is financial risk management, in which the spreadsheet helps in financial tasks with consideration of risk of monetary loss if the spreadsheet fails in meeting its expected output. Spreadsheets can take data from several sources and implement complex sequences of calculations to determine values that can be risky in a business organization involved in minimizing financial risk from differences in rates of exchange.
Using what-if analysis tool can help determine the level of financial loss. Spreadsheets also support the creation of financial statements, such as balance sheets. This application is possible because spreadsheets contain arithmetic notations and functions for performing financial operations. Banks and other financial institutions can benefit from spreadsheets because of the inbuilt functions which enable users to calculate interests and principle amounts.
The third group is managerial information systems, where Excel helps executives to analyze their business and make strategic decisions. The capability of Excel to hold a lot of data is seen as a way of managing extensive business information. The spreadsheet can be used to determine the distribution and financial performance of a firm; this is realized through the many calculation capabilities provided by the software. Excel can also be used to generate reports that can be used by the executives to make decisions on annual planning cycle. In marketing, Excel can be used to analyze customer perceptions about a given product or service. Survey data can be ranked and supplied in a spreadsheet application for analysis (Shelly et al. 115).
The final application is business process infrastructure, in which spreadsheet is used as a component of business process. Business processes central to organizational mission and thus take inputs and generate outputs with regards to business goals. Spreadsheet software can be used to project market expectations through the integration of what-if-analysis and analysis ToolPack. Spreadsheets enable business analysts to cope with the dynamism of business requirements through the incorporation of recalculation feature.
Financial and accounting applications of spreadsheets can be attributed to the ability to create and manage budgets; that is, income and loss accounts. The first consideration is the income; this can be weekly or monthly wages. Consequently, knowing the anticipated expenses ensures that proper analysis of the proposed model for the budget is guaranteed. After gathering the various requirements for the budget, the income and expenditure categories are created in the worksheet window. The columns at the top of the first worksheet are formatted to represent the weeks or months which finances are expected.
On the left of the sheet, we type in the headings that represent the income for that month (cell B2) and the items we expect to purchase during the period (cell B4 to B16); this is placed in the rows downwards. The last labels can be “total expenses” and “savings”. Thus, each week has its own budget category; this is represented by the columns. The worksheets are labeled from January to December since each sheet contains four data categories.
Therefore, to calculate the total expenses, a SUM function is used. For instance the formula =SUM (B4:B16) totals all the expenses for the first week of the month. Savings are then calculated by subtracting expenses from the income, i.e. =B2-B17. The savings for the first week can be carried forward for the second week. This means that income for the second week refers to the savings from the first week. Other functions like average for mean value, max for maximum value, and min for minimum value are relevant in the budget for analysis purposes. Furthermore, recalculations may be used to compute the values for the rest of the week in that month (Shelly et al. 116). The sum function is used to calculate the total expenses for the month and therefore depicting the monthly savings; thus, coming up with a classic budget.
Conclusion
The use of spreadsheet software has enhanced the way business operations operate. With little knowledge of calculations, a user can be able to manage data in rows and column and consequently perform calculations which can be used for analysis purposes. The main features of spreadsheet programs, such as Excel, include the organization of spreadsheets into columns and rows, calculations, recalculation, and charting.
With such features, a spreadsheet program enhances data entry, calculation, and analysis. In business field, spreadsheets can have the following uses: to create application software; to generate financial statements; as an executive information system; and enhance business process infrastructure. Therefore, individuals and businesses should be able to determine their financial and business requirements before embarking on appropriate application of spreadsheet tools.
References
FunctionX. Introduction to Data Entry. 2008. Web.
Harvey, G. Excel 2007 For Dummies. Hoboken, NJ: Wiley Publishing, Inc., 2006. Print.
Laudon, K. C., & Laudon, J. P. Management information Systems: Managing the Digital Firm. (9th Ed. Upper Saddle River, NJ: Pearson Prentice Hall, 2006. Print.
Root, G.N. “What are the Benefits of Spreadsheets?” ehow. 2010. Web.
Shelly, G.B., Vermaat, M.E., & Quansney, J. Discovering Computers 2009: Living in a Digital World, Introductory. 3rd Ed. Boston: Cengage Learning, Inc., 2009. Print.