The heart of good financial analysis is the visualization of data. Visualization makes even complex numbers and trends a lot clearer through the aid of charts. Among those, many are quite handy for financial data representation to quickly derive an idea about the performance, trend, or outliers in it. Thus, the following provides best chart choices for financial analysis in Excel with their applicability, use cases, and other important hints for use.
1. Column and Bar Charts
Purpose: Column and bar charts are good for comparison of values between categories. Column and bar charts in financial analysis are mainly used to compare revenue, expenses, or profit among different periods, products, or departments.
Best Use Cases:
Revenue or Expenses Comparison – over the month
Sales performance by product category
2. Line Charts
Use for trend over time Line charts are excellent for demonstrating trends over time. These are widely used in financial analysis when showing changes in revenues and expenses or other data over months or quarters and even years.
Ideal for the following
Revenue growth trends
Expense trends by category over time
Stock or investment value over time
3. Pie Charts and Doughnut Charts
Purpose: Pie and doughnut charts are used to indicate the proportion of a given category within a whole. They are great at communicating a slice of budget or revenue broken down into its constituent categories, but really only useful when comparing few categories, ideally no more than six.
Ideal Usage Scenarios:
How various expense categories break out
Revenue streams as percent of total revenue
4. Waterfall Charts
Purpose: Waterfall charts is one unique way of representing how incrementally positive and negative values impact an overall total. They prove really handy in showing how contributions from individual constituents contribute towards a final total or balance, for example in terms of revenues and expenses.
Best Use Cases
Profits/Losses constituents
Cash Flow Analysis
5. Scatter Plots
Purpose: A scatter plot is used to describe the relationship between two variables. They are very helpful for correlation analysis or in identifying any patterns and outliers.
Best Use Cases:
Revenue vs. profit margins across product lines
Expense vs. income growth
Cost of goods sold vs. sales performance
6. Combo Charts
Objective: Combo charts. You can combine two kinds of charts on one single chart, such as the column and line, this is useful for two comparisons of related data with differently scaled series, for instance, sales revenue with that of growth percentage.
Best uses
Revenue with growth rate
Expenses vs. profitability over time
7. Area Charts
Purpose: Area charts are line charts with filled areas underneath the lines. They can best be used to depict accumulative data as well as trends over time, and it is helpful in comparisons among different categories.
Best Use Cases:
Revenue over time in different product lines
Tracking the expenses of different departments
8. Bullet Charts
Purpose: A bullet chart is an excellent way to represent progress toward a target. It’s very useful for tracking budgets because you can easily see actual performance versus goals.
Best Use Cases:
Monthly or quarterly sales targets
Expense tracking against budget
9. Heat Maps
Purpose: Heat maps are excellent at calling attention to areas of interest in a table using a color gradient. They can be used to visualize performance across a range of categories or time periods, like monthly expenses or revenue by department.
Best Use Cases:
Monthly budget comparison
Sales performance by region
10. Sparklines
These are small mini-charts that can be fit into a single cell, which helps illustrate trends in small spaces, like financial dashboards. These mini-charts can bring about a feeling of change without taking much space.
Best Use Cases
These mini-charts can very well be used for
monthly or quarterly sales trends of the product line
the cash flow over time
As mentioned before, each type of chart has a different application to the data, meaning which type of chart used may be dependent on what form of data and the understanding it requires. In column and line charts, more financial data can easily and creatively be accommodated with more flexible options but application-based charts such as waterfalls and bullet are helpful for specific finance works. It is possible with complex financial data to get even simpler, yet potent forms of visualization to assist further analyses and decision-making.