Information Technology and You 157it difficult to decipher a small company or single practitioner from the large,
Fortune 500 company with a dedicated media department.
Today’s word processing is as powerful as most desktop publishing soft-
ware, and it is so simple to use that any novice equipped with simple instruc-
tions can master the software. Not only can documents include text, but they
can also contain spreadsheet tables, drawings, and pictures; be specially for-
matted; and be black-and-white or color. Most word processing applications
come with clip art, which consists of drawings, cartoons, symbols, and /or cari-
catures that can be incorporated into the document for emphasis.
Spreadsheet Sof tware
For the accounting and finance executive, spreadsheet software has had the
greatest impact on productivity. Imagine a company controller who has been
asked to prepare the budget for the coming year. The company manufactures in
over a thousand products with special pricing depending on volume. The con-
troller not only has to make assumptions about material costs, which might
change over time, but also has a history of expense levels that must be factored
into the analysis. Using pencil and paper (usually a columnar pad), the con-
troller calculates and prepares all of the schedules necessary to produce the
final page of the report, which contains the income statement and cash f low.
Confident that all calculations are complete, the controller presents the find-
ings to management, only to be asked to modify some of the underlying as-
sumptions to ref lect an unexpected change in the business. As a result, the
controller must go back over all of the sheets, erasing and recalculating, then
erasing and recalculating some more.
Computer spreadsheets rendered this painful process unnecessary. Spread-
sheets allow the user to create the equivalent of those columnar sheets, but with
embedded formulas. Consequently, any financial executive can create a financial
simulation of a business. Thus, merely by changing any of a multitude of assump-
tions (formulas), one can immediately see the ramifications of those changes.
Spreadsheets allow for quick and easy what-if analyses. What if the bank
changes the interest rate on my loan by 1%? What impact will that have on my
cash f low and income? In addition, most of the packages provide utilities for
graphing results, which can be used independently or integrated into a word
processing report or graphics presentation.
A spreadsheet is composed of a series of columns and rows. The intersec-
tion of a row and column is referred to as a cell. Columns have alphabetic
letters, while rows have numbers. Cell reference “B23” indicates the cell in
column B and row 23.
Exhibit 5.2 provides an example of a simple spreadsheet application. A
company’s pro forma income statement, the sample spreadsheet is a plan for
what the company expects its performance to ref lect. In this example, the
company expects to earn $275,475 (cell H18) after tax on $774,000 (cell H3) of
sales revenues. At the bottom of the exhibit, there is a series of assumptions