Why use a waterfall chart?

Waterfall charts can also be used to visualize how different factors contribute to the difference in results between two years, two divisions of a company etc. Here we will look at a few examples of waterfall charts and how they can be constructed in Spotfire^®. We will see how easy it is to visualize different kinds of data using waterfall charts.

Different types of waterfall charts

Standard waterfall chart

Waterfall charts can be used to illustrate how different factors contribute to a final result. Here?s an example that shows how sales revenue, cost of goods sold, employee salaries,  and other financial categories contribute to profit.

Note that positively contributing factors have been colored green and negatively contributing factors are red. The last bar deserves some extra attention: it is the bar that indicates the final result.

Using Subtotals to highlight intermediate results

Sometimes you may want to highlight intermediate results in a waterfall chart and show them as a full bar. The financial term EBITDA stands for ?Earnings Before Interest, Tax, Interest, Depreciation, Amortization?. It may be interesting to show the EBITDA as a full bar as is shown in the below picture.

Waterfall charts for difference analysis

Waterfall charts are also powerful when you want to show the difference between for example two years, two product lines etc. Below is a waterfall chart that shows how the sales performance for a group of business units affected the total sales in 2014 vs 2015 (full bars), including the difference in performance for each business unit (flying blocks).

By comparing the bars on the left vs the right end of the chart one can see that the result in 2015 was better than in 2014, and also how each business units in between contributed to that difference. In this case business units that improved their results in 2015 are colored green, and those business units that had a worse result in 2015 are colored red. Comparing business units performance between two years is only one example of using a waterfall chart for comparison analysis, other examples could be comparing two divisions of a company, comparing two business scenarios etc.