A waterfall chart is a popular data visualization tool used in large and small organizations. With this new excel chart, what used to take multiple and complex iterative steps can be done in just a few clicks.
In this article, you’ll learn what a waterfall chart is, how helpful it can be, and how to create or construct one using Excel.
What is a waterfall chart?
A waterfall chart is also called a bridge graph, waterfall graph, bridge chart, flying bricks chart, cascade chart, net profit column chart, and Mario chart.
Regardless of the name, the versatile column chart is a graphical representation of data that helps demonstrate how an initial value or a starting position is decreased or increased by immediate negative or positive values.
The floating columns show positive and negative values, while the whole columns represent the initial and final values.
When to use a waterfall chart
A waterfall graph is used by financial institutions, accounting departments, and consulting companies to track how a net realizable value is attained between actual and budgeted costs or through a potential gain and a substantial loss over a specific period.
Today, companies in the consulting, real estate, banking, academic, and corporate sectors usually find different waterfall graph types effective in facilitating performance, financial, quantitative, and trending analysis.
The chart offers an exciting way to know the sales pipeline and sales earnings, evaluate a company’s loss or profit over time, understand cash flow statements, track a company’s changes in OPEX (operating costs), determine turnover rates, etc.
You can use a waterfall chart when:
- Contrasting competitors
- Documenting contracts
- Evaluating enterprise profit
- Developing executive dashboards
The benefits of using waterfall charts
- Shows how a project or process is progressing.
- Can track the cumulative effect of negative and positive values.
- Demonstrate how a certain change affects a company’s financial position over time.
With all these advantages to enjoy, it is easy to see why waterfall charts are frequently relied upon in specific industries.
Some managers even refer to this helpful chart as a financial model since it enables them to illustrate a budget change and the several factors (critical factors) that influence the product value over time.
How to create a waterfall graph in the latest Excel versions
1. Create a data table
Since the 2016 Excel version creating a data table is seamless – you don’t have to add the down, up, and base columns. Make sure the data table begins with the initial value and then the positive and negative changes in the following columns.
2. Choose your data
Choose your data and click the insert tab and then the charts menu. On the waterfall graph drop-down menu, choose waterfall as the needed chart type and it will be inserted into your spreadsheet in Google Sheets.
3. Format data points
To designate a data point as a subtotal or total, double-click on the data point and check the “Set as total” box in the Format Data Point.
Here are steps on how to build a bridge graph in earlier versions of Excel:
- Create a data table
- Insert formulas
- Make a stacked column chart
- Transform into a waterfall chart
- Make your chart attractive by adding colors, data labels, a title, etc.
Waterfall graph shows what items or the negative and positive growth factors that contribute to the transition, change, or growth from a starting point to an endpoint.
Don’t add many items in the bridge or breakdown to make it easier for a reader to distinguish the main items. If you have a lot of data that you want to combine in one chart, then consider data extraction or pull data.
It is safe to say that the main point of this versatile chart is to highlight significant growth contributors (positive and negative influences) or growth between two points.
A waterfall chart can also improve your time management skills since they are like a trading strategy optimization.
Lastly, being able to highlight substantial differences between totals is important, but is a feature that is missing in Microsoft Excel waterfall graphs.
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