Excel formulas can easily be used to answer "What if" - type questions such as:
"What if I spent this amount for a new car versus that amount, how much will the taxes be?"
- "What if I worked this number of hours versus that number in a week, how much would I earn?"
Cell references identify the location of your data in the spreadsheet, such as B4 or B5.
Example - Formula using cell references
In this example the formula multiplies the contents of cell B4 times the contents of cell B5.
Referring to the image to the right, our example is arranged in the following manner:
- cell B4 holds the cost of a car
- B5 contains the tax rate
- the formula in cell B6calculates the amount of tax that will be paid for this car.
By using cell references in the formula you can change the the values in cells B4 and B5 without affecting the formula.
By simply changing the value in cell B4, the answer to your formula will change accordingly in cell B6.
Using cell references rather than actual numbers in formulas, allows you to get a variety of answers to the question:
"What if I spend this amount on a car, how much will the taxes be?"
Asking "What if" questions are very useful in business when planning new projects. Cost projections for different scenarios can be quickly created and the results compared.