Quantrix & Excel: 3 Key Differences

A QUANTRIX WHITE PAPER



























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Abstract

This whitepaper is designed to educate spreadsheet users about three key conceptual and
practical differences between Quantrix Modeler and Excel.

A better understanding of what sets Quantrix and traditional spreadsheets apart will help
financial and quantitative modeling professionals evaluate the impact Quantrix Modeler can
have on their modeling success.


This paper examines the following:

Quantrix matrices compared to worksheets,
Quantrix items compared to spreadsheet rows and columns, and
Quantrix formulas compared to spreadsheet cell-based formulas.

The Problem


Spreadsheet software has been commercially available for more than 25 years and is an
appropriate solution for many tasks commonly performed by the financial and data modeling
community.

However, the spreadsheet has its limitations when creating more complex models that employ
multiple dimensions, formulas, and immense data sets.

Complex spreadsheets become inherently inflexible and prone to error as they grow thus
undermining confidence in the data and insight they produce.

Todays businesses, government agencies, non-profit organizations, and academic institutions
require a tool that enables more efficient and scalable modeling while being intuitive to the user.







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Quantrix Matrix compared to the Worksheet

Quantrix models consist of multi-dimensional matrices. Spreadsheets, by contrast, are two-
dimensional worksheets that come in workbooks. While matrices have features in common with
worksheets, there are important differences.

It may be helpful to first define what a dimension is in practical terms.

Take, for example, a Profit & Loss (P&L) budget. When building a P&L budget by month for one
year, one dimension would be represented by month and a second dimension would be a P&L
line item such as Revenue, Expenses, Profit, etc.

Other typical dimensions in a business model could include Business Unit, Subsidiary, Product,
Channel, Region, Scenario, or Case.

In the simplest case, there is a two-dimensional model Month x P&L Line Item. It is relatively
easy to create this model in one Worksheet. However, if the business has multiple subsidiaries,
it may be necessary to prepare this budget by subsidiary as well. With the introduction of
subsidiary, the model has now expanded to three dimensions: Month x P&L Line Item x
Subsidiary.






























Illustration 1:
Adding the category, Subsidiary, (top left) creates a multidimensional matrix that is easier to
view and manipulate than a spreadsheet.






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To accomplish this in a spreadsheet, one typical approach would be to set up the budget for
each subsidiary on a separate worksheet.

This is where Quantrix diverges from a spreadsheet. Matrices in Quantrix support more than two
dimensions. In fact, Quantrix supports up to 16 dimensions. Therefore, it is unnecessary to take
the same design approach as with a spreadsheet. Rather, the third dimension, subsidiary, can
be added to the P&L Budget by simply inserting a new category.

The advantages for the financial modeler with this approach are as
follows:

Economy.
Standard P&L formulas for items like gross profit or EBITDA, which will
apply to any subsidiary, are written just once.

Agility.
It is necessary to add more years or additional line items only once (rather
than repeating the change in each worksheet in a spreadsheet) and the change will
apply to all subsidiaries.

Insight.
To compare and contrast the subsidiaries, simply move the category tiles in
the matrix to get the desired perspective.



Once again, Quantrix matrices are multi-dimensional.

Two-dimensional structures, which must be replicated in a spreadsheet to accommodate extra
dimensions, can be managed more efficiently in just one matrix in Quantrix.









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Quantrix Items and Categories Compared to Spreadsheet Rows
and Columns

Most financial and data modeling professionals are used to working with fixed rows and columns
in a spreadsheet, e.g. A, B, C, D and 1, 2, 3, 4. Columns are represented by letters and rows by
numbers. In Excel, these references cannot be changed. Rather, meaningful row and column
labels are defined in cells.

Quantrix uses the term items instead of rows and columns because the position of the items is
not fixed. With simple drag-and-drop navigation, users can move column items so they are
represented as rows, and vice versa. In Quantrix, it is also possible to change the name of an
item. Items can have generic labels like A, B, C, 1, 2, 3, or they can have meaningful labels like
Revenue, Costs, Profit, 2006, 2007, and 2008.

Items belong to categories in Quantrix and categories are defined by category tiles. Category
tiles are moved by drag-and-drop to manipulate the position of the items. A category, and the
items belonging to it, can be used elsewhere in a model. In a P&L budget model, for example,
there may be category, Year, with items, 2006, 2007 and 2008.






























Illustration 2:
Linking categories such as Year automatically extends the model rather than
manually creating new worksheets.






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This model may also require the creation of a Balance Sheet and a Cash Flow statement in
separate matrices. In this case, it may be desirable to model the Balance Sheet and Cash Flow
for the same years as the P&L.

Instead of creating new Year categories in the Balance Sheet and Cash Flow matrices, simply link
the Year category and all its items from the P&L matrix to the two new matrices. This
automatically creates the required years.


The powerful capability of linking a dimension, such as Year, from one section of a model to
another is not possible in Excel and is important to consider when building models in Quantrix.

In addition to eliminating the replication of labels in new matrices, there are other benefits:


Simplicity.
Formulas are much simpler, because they are able to cross reference the
proper items. For example, the first line of the cash flow may be Net Profit. Net
Profit comes from the P&L. So, in the Cash Flow, only one formula is required that
says Net Profit = P&L::Net Profit. This formula will automatically return the proper
figure for each Year from the P&L matrix.

Automation.
When making changes to the linked category in one matrix, the same
change will automatically update the other matrices. In the previous example, if the
P&L budget model is extended to 2009 by adding a new item, it will automatically
appear in the Balance Sheet and Cash Flow matrices. Existing formulas will
automatically apply to the new year there is no need to manually copy and paste.



In summary, when setting up multiple matrices in a Quantrix model, remember that common
categories, such as Year can be linked across matrices to greatly simplify logic and model
maintenance on an on-going basis.






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Quantrix Formulas Compared to Spreadsheet Cell-based Formulas

A common practice developed by spreadsheet users is writing formulas in cells by clicking on
the cell and hitting the equals (=) key. When that formula is needed in other cells, the original
formula is copied and pasted into the new cells.

In Quantrix, formulas are not written in cells. Instead, they are written in a separate formula
section just below the matrix. They are also written to refer to the item or category for which the
formula should calculate.

Furthermore, formulas in a spreadsheet have no reference to the left of the equals (=) sign. This
is due to the fact that the left-hand side of the formula is always the cell reference itself. Writing
formulas in this manner is not particularly intuitive. If a user were to stand at a white board and
explain how to calculate Current Assets in a Balance Sheet, she would likely write it like this:


Current Assets = Cash + Accounts Receivable

Rather than this:


= Cash + Accounts Receivable

Or, if Cash and Accounts Receivable are in cells B2 and B3, almost certainly not like this:


= B2 + B3





Illustration 3:
Formulas are written outside the cell and in the way people think of them.






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Formulas in Quantrix are written the way that the human brain intuitively conceives and
expresses them. If Current Assets equal the sum of Cash and Accounts Receivable, then the
Quantrix formula will be written like this:


Current Assets = Cash + Accounts Receivable

Again, the Quantrix formula is not written in the cell. It is written to refer to