Definition
VBA Goal Seek is a built-in Excel function that uses numerical trial-and-iteration method to solve equations. It’s used typically to find the right input when the output is known, thereby seeking the ‘goal’ as the known end-result. This function can be further automated for complex calculations through Visual Basic for Applications (VBA), an Excel programming language.
Key Takeaways
- VBA Goal Seek is a built-in feature in Excel used to find the optimum value to achieve a desired goal. It’s a method used to adjust a specific variable to achieve a target output.
- The method works by iterating potential input values to provide a solution – or ‘goal’ – without the user having to manually input each value. This method is often utilized in financial modeling and forecasting.
- VBA Goal Seek mainly works with one variable input values. However, when handled correctly, you can perform a multi-variable goal seek or even combine with other Excel VBA tools to enhance complexity and flexibility.
Importance
VBA Goal Seek is a vital feature in financial planning, as it enables users to find the required input to attain a desired level of output.
This analytical procedure is an important part of modeling in Excel and forecasting in finance as it serves to anticipate possible financial outcomes.
It is commonly used in scenarios that involve changes in variables relating to cost, revenue, or profitability.
By changing the input values until the desired result is achieved, the Goal Seek process allows users to identify the crucial variables influencing an outcome and to determine the optimal values for those variables.
Therefore, VBA Goal Seek plays a critical role in strategic financial decision-making, vital in achieving specific financial goals.
Explanation
VBA Goal Seek is a useful financial tool that operates within Microsoft Excel and is used primarily for financial modeling and projections. Its main purpose is to identify the necessary input value required for a formula to reach a specific output, essentially answering the question “what value would it take for a formula to arrive at a predetermined result?” This is particularly beneficial in complex mathematical models where manually calculating or predicting these values would be exceptionally challenging and time-consuming.
The broader application of VBA Goal Seek is to help in decision-making and financial planning. Users can examine potential scenarios and outcomes with varied inputs.
For instance, financial analysts can use it to predict the sales revenue needed to reach a certain net income. On a personal finance level, it can be used to calculate the amortization of a loan at different interest rates or payment amounts.
The tool provides a clear path of action based on the defined goal, streamlining the decision-making process and increasing efficiency in planning.
Examples of VBA Goal Seek
VBA (Visual Basic for Applications) Goal Seek is a financial tool often used in Microsoft Excel to find the input values needed to achieve a desired goal. Here are three real-world examples:
Business Profit Maximization: Let’s say a business owner wants to achieve a target profit of $500,000 for a product. She knows her fixed costs, variable costs per unit, and price per unit, but she’s unsure how many units to produce and sell to reach this target. Using VBA Goal Seek, she can determine the exact units required to reach the target profit.
Loan Balancing: A financial analyst at a bank wants to calculate the monthly payments required to settle a loan within a certain time frame. Given the loan’s amount, the interest rate, and the desired settlement period, he can use VBA Goal Seek to determine the necessary monthly payment to fulfill the loan in the predetermined period.
Break-Even Analysis: A restaurant owner wants to calculate the number of meals they need to sell per month to break even. Given the fixed costs (rent, salaries, etc.), variable costs (food, drinks), and average meal price, the owner can use VBA Goal Seek to find out the number of meals he needs to sell to cover all costs and break even.
FAQ for VBA Goal Seek
What is VBA Goal Seek?
VBA Goal Seek is a method available in Excel VBA to find the value of a cell by changing the value of another cell in a formula. It’s a great tool especially in finance for determining the required result by altering an independent variable in your analysis.
How does VBA Goal Seek work?
VBA Goal Seek works by adjusting the input value of a particular cell to reach a targeted output. You choose the output cell that you want to reach a specific goal, and the input cell whose value is to be adjusted, and VBA Goal Seek does the rest.
Where is the VBA Goal Seek used?
The Goal Seek feature of VBA is commonly used in finance and investment, for instance, while calculating the interest rate, principal amount, or years required for a certain investment. Similarly, it can be used in any domain which requires reverse calculation to find an initial value that would give a defined result.
How to use Goal Seek in VBA?
To use Goal Seek function in VBA, you can use the syntax “Range.GoalSeek Goal, ChangingCell”. Here “Goal” refers to the value you want to achieve and “ChangingCell” is the cell containing the value that needs to be adjusted to reach the goal.
Is there an example of using VBA Goal Seek?
Yes, if you want to find out what sales would need to be to achieve a net income of $5000, with your cost of goods sold(B2) as $2000 and Operating Expenses (C2) as $1000 you can use the following code: Range(“A2”).GoalSeek Goal:=5000, ChangingCell:= Range(“D2”).
Related Entrepreneurship Terms
- Spreadsheet Modeling: This refers to the process of creating a model in a spreadsheet to analyze different scenarios and predictions in financial decision making.
- Excel Macros: Macros are sequences of instructions that automate tasks, often written using VBA (Visual Basic for Applications). They are commonly used in financial analysis to handle repetitive tasks.
- Optimization: In financial context, optimization is the process of adjusting various inputs to achieve the best output. Goal Seek in Excel, often using VBA, is frequently used in optimization to find an ideal value for a particular input.
- What-if Analysis: This is a process used to make forecasts and predictions in Excel. Goal Seek is a key element of what-if analysis, allowing users to see how one data item will change based on change in other data.
- Financial Modeling: This is the task of building an abstract representation of a financial decision making situation. VBA Goal Seek is often used within financial modeling to simulate different financial scenarios.
Sources for More Information
- Microsoft Office Support: Microsoft’s official support site is one of the reliable sources, as VBA Goal Seek is a function within Excel. They provide detailed explanations, use-cases, and walk-throughs.
- Excel Easy: A website providing a comprehensive and easy-to-follow guide on various Excel features, including VBA Goal Seek.
- WallStreetMojo: This website features numerous articles and guides about finance, including the usage of different Excel functions in finance which includes VBA Goal Seek.
- Extend Office: This website provides tutorials and tips for improving productivity using Office tools like Excel, including the VBA Goal Seek function.
