Scenarios in Excel are a powerful tool for what-if analysis. They allow you to create different sets of assumptions (changes to input values) and see how those changes would affect the outcome of your calculations.
This helps you analyze various possibilities and make informed decisions based on potential future situations.

Here's a breakdown of scenarios and how they can be used:

What are Scenarios?

Imagine you have a financial model or budget forecast in your spreadsheet. It uses certain values for things like sales figures, expenses, or interest rates. Scenarios let you create different versions of your model with alternative values for these input cells.
You can name these versions "Best Case," "Worst Case," or other descriptive names depending on the situation you're trying to model.

How to Create Scenarios:

1. Identify Input Cells: First, determine which cells in your worksheet contain the values you want to vary across different scenarios. These are your input cells.

2. Open Scenario Manager: Go to the "Data" tab and locate the "What-If Analysis" section. Click on "Scenario Manager" to open the dedicated tool.

3. Add a Scenario: Click the "Add" button in the Scenario Manager window. Here, you'll define your first scenario:
- Scenario Name: Give your scenario a clear and descriptive name (e.g., "Increased Sales").
- Changing Cells: Select the input cells you want to change for this scenario. Click the collapse button next to "Changing Cells" and then highlight the relevant cells in your worksheet.

4. Define Changes: For each selected input cell, enter the specific value you want to use in this scenario.

Creating Multiple Scenarios:

You can repeat step 3 to create additional scenarios with different assumptions. For example, you could create a "Worst Case" scenario with decreased sales figures and higher expenses.

Analyzing Results:

Once you have defined your scenarios, click "OK" in the Scenario Manager window. Excel will calculate the outcomes based on the different input values in each scenario. The results will be displayed in a summary table, showing how the changes in your input cells affect the final output of your formulas.

Benefits of Using Scenarios:

- Visualize different outcomes: Scenarios provide a clear picture of how potential changes in various factors could impact your overall results.
- Improved decision making: By analyzing multiple scenarios, you can make informed decisions based on a broader understanding of potential future situations.
- Flexibility: You can easily switch between scenarios and update them as needed, making your analysis adaptable to changing circumstances.
- Error reduction: Scenarios can help avoid errors by allowing you to test different assumptions within the same model, instead of manually creating multiple copies of your spreadsheet.

Overall, scenarios are a valuable tool for anyone who wants to analyze their data and plan for different possibilities in Excel.