Risk Analysis? Why Are These Features Important Essay

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Risk analysis? Why are these features important components of the Excel analysis process? If so, explain how, If not, explain why.

Base-case analysis,

Base-case analysis is very much an art of Excel since the accountant / mathematician usually starts off with a "base case" set of assumptions and inputs. These are the accountant's best estimates, and he would use these to produce a set of expected results.

Scenario testing, for instance, often involves these base-cases analyses.

In scenario testing, the mathematician sets up alternative situations, such as the ones formulated in the Table below ('inflation rate', 'earning rate', and 'salary growth'). Each situation consists of a base-case analysis of assumption and input and the whole model is then run through the Excel system.

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Base case analysis is essential for business planning and risk management since one has to know one's base-case situation before structuring plans for one's business.

What-if analysis,

What-if analysis is also superbly worked out by the Excel program which can work out different cases that may occur if certain what-if options were followed. Doing this can better help the mathematician / businessman or anyone who uses this system which prediction / alternative would be the best option for him.

What-if analysis, for instance, may be used to build two budgets where each assumes a certain level of revenue. Different values can be plugged in either budget (or more) and investigated to explore results and to assess whether budget should be modified (or added.....

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