Suppose that you want to create a budget but are uncertain of your revenue. By using scenarios, you can define different possible values for the revenue and then switch between scenarios to perform what-if analyses.

For example, assume that your worst case budget scenario is Gross Revenue of $50,000 and Costs of Goods Sold of $13,200, leaving $36,800 in Gross Profit. To define this set of values as a scenario, you first enter the values in a worksheet, as shown in the following illustration:

The Changing cells have values that you type in, while the Result cell contains a formula that is based on the Changing cells (in this illustration cell B4 has the formula =B2-B3).

You then use the Scenario Manager dialog to save these values as a scenario. Goto the Data tab > What-If Analysis > Scenario Manager > Add.

In the Scenario name dialog, name the scenario Worst Case, and specify that cells B2 and B3 are the values that change between scenarios. If you select the Changing cells on your worksheet before adding a Scenario, the Scenario Manager will automatically insert the cells for you, otherwise you can type them by hand, or use the cell selection dialog to the right of the Changing cells dialog box.

Note: Although this example contains only two changing cells (B2 and B3), a scenario can contain up to 32 cells.

Protection – You can also protect your scenarios, so in the Protection section check the options that you want, or uncheck them if you don't want any protection.

Select Prevent Changes to prevent editing the scenario when the worksheet is protected.

Select Hidden to prevent displaying the scenario when the worksheet is protected.

Note: These options apply only to protected worksheets. For more information about protected worksheets, see Protect a worksheet

Now suppose that your Best Case budget scenario is Gross Revenue of $150,000 and Costs of Goods Sold of $26,000, leaving $124,000 in Gross Profit. To define this set of values as a scenario, you create another scenario, name it Best Case, and supply different values for cell B2 (150,000) and cell B3 (26,000). Because Gross Profit (cell B4) is a formula - the difference between Revenue (B2) and Costs (B3) -  you do not change cell B4 for the Best Case scenario.

After you save a scenario, it becomes available in the list of scenarios that you can use in your what-if analyses. Given the values in the preceding illustration, if you chose to display the Best Case scenario, the values in the worksheet would change to resemble the following illustration: