Introductory Financial Economics with Spreadsheets

Cornelis van de Panne

• Publisher: Routledge
• Year: 2020
• eBook ISBN: 9781000150889
• Edition: 1
• Topic: Business
• Subtopic: Accounting
• Index: Business

This text combines the teaching and explanation of spreadsheets with the essentials of finance and economics in a highly-visual, interactive and project-based approach. Students progressively build skills in Microsoft Excel, by proceeding through a variety of basic applications. Users of other spreadsheets will also benefit from the book. This innovative publication includes an accompanying disk that provides the spreadsheet files on which the text is based and the data for the exercises and assignments following each chapter.

part 1

Spreadsheets and Budgets

Chapter 1
Spreadsheet Background and Basics

This chapter introduces the fundamentals of spreadsheets and Microsoft®Excel. Advantages of spreadsheets in general are discussed and some historical details are given. Entering text, numbers and formulas are indicated, as well as saving and opening of spreadsheet files.

In this chapter you will learn the following spreadsheet commands, features, and functions:

• Formulas

• Sum

• Formula display

• Save, Save as

• Exit, Quit

• Open

1.1 The Essence of Spreadsheets

A computer spreadsheet is a tool for working with numbers.

Numbers must be accompanied by verbal descriptions to make sense of them and to provide context. Consider the example of a travel expenses claim, see Panel 1.1, which represents handwriting on a sheet of paper.

Panel 1.1 Travel Expenses Claim

Travel Expense Claim
Airline Ticket	$	478.34
Hotel Bill	$	258.73
Shuttle	$	16.00
Parking	$	14.50
Meals	$	80.75
Total Expenses	$	848.32

Each item consists of two parts: (1) a description of the item, (2) its amount. For example, the first item may be described as Airline Ticket, and its amount at $478.34. The following four items are similar. The amount of Total Expenses is the sum of the five numbers above it, which is obtained by the addition of these numbers, either ‘manually’ or by some calculator.

A tool for working with numbers, such as a spreadsheet, must therefore be able to work with the text of descriptions and work with numbers. It must therefore have both word processing capabilities and calculating capacities.

When work is done on a sheet of paper, descriptions and amounts are put in specific places along horizontal and vertical lines, sometimes printed on the paper such as the horizontal lines in Panel 1.1, or left to the imagination, as in the case of the vertical lines. The arrangement on the page makes it easier to understand what is represented. A spreadsheet has the same organization in terms of horizontal and vertical lines, or rows and columns. The name spreadsheet, which has its origin in accounting, refers to this organization in rows and columns.

A spreadsheet can be characterized as a combination of a word processor and a calculator operating in an environment organized in rows and columns.

The computer spreadsheet can be considered as an extension of the sheet of paper. Its two main advantages over sheets of paper are:

1. It can perform arithmetical and other operations on the amounts of the items.

2. Whereas what is written on paper is difficult to change (by erasing and rewriting), parts of computer spreadsheets are changed easily.

These two advantages are mutually enhancing because after a value has been changed calculations can be redone effortlessly and usually automatically. The computer spreadsheet can be seen as the natural extension and the natural successor of the lined paper sheet with columns. This explains the widespread adoption of spreadsheets and the commercial success of companies producing the software.

Many other features have been added to spreadsheets, such as graphing, data processing, and programming capabilities, but their inclusion has been a consequence of the success of the basic concept of a spreadsheet as a combination of a word processor and a calculator working in a grid environment.

1.2 The Background of Spreadsheets

The idea of computer spreadsheets originated with Dan Bricklin who developed one in 1978 while working on his MBA at the Harvard Business School. In 1979 he introduced, together with Don Fylstra and Bob Franklin, a commercial version called VisiCalc (Visible Calculator) for the Apple II microcomputer. This program became quite successful with business. Spreadsheet use by corporations became almost universal after the IBM-PC microcomputer was launched in 1981, and Mitch Kapor introduced his spreadsheet Lotus 1-2-3 in 1982. Lotus was larger and faster than VisiCalc and had a very effective command structure. Moreover, it contained, in addition to the spreadsheet, graphics and database facilities.

Today, many other spreadsheets exist, such as Microsoft® Excel, Quattro and Wingz, and spreadsheets are included in integrated packages such as Microsoft® Office®. Spreadsheets of different software companies are fiercely competitive, so that the features of comparable versions are about the same. They may be different in terms of commands and tools, but in almost all cases equivalents can be found. Details of display may be different, but these are relatively unimportant. There may be certain advanced fe...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Preface
• Dedication
• Acknowledgements
• Part 1 Spreadsheets and Budgets
• Part 2 Basic Concepts of Financial Economics
• Part 3 Project Evaluation
• Part 4 Database Management Applications
• Index