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About this lesson
The check that checks for everything else sensitivity and error checks don't.
Download this lesson’s related exercise files.Alert Check
9.3 KB Alert Check
Alert checks explained using the CRaFT methodology.
When to use
Many modelers add checks as an afterthought. Basically, it is too late to create them then. While building a model, a developer knows what situation might break a formula. That is when a check should be created. When the issue is foremost in your mind, create the check there and then.
- Alert checks: everything else! This flags points of interest to users and / or developers issues that may need to be reviewed
- e.g. revenues are negative
- debt covenants have been breached
- A company has a responsibility to ensure that it is trading while solvent – simply put, its assets exceed its liabilities. This example will put an alert check in to ensure the company is solvent.
- The formula =IF(SUM(E14:E15)=0,(E6<0)*1,0) will ensure that the Prima Facie and the Balance Checks are OK, and if so, will check to ensure that the Total Equity is greater than 0 – meaning the company is solvent. In this example the total equity is negative and therefore the insolvency check is producing a 1 to highlight the company is insolvent.
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