May 13, 2002
In this chapter we will focus on seven widely-available graphs that are easily produced bymost any electronic spreadsheet. They are column graphs, bar graphs, line graphs, area
graphs, pie graphs, scatter graphs, and combination graphs. Unfortunately there is no
consistency in definitions for basic graphs. One writer’s bar graph is another’s columngraph, etc. For clarity we will define each as we introduce them.Traditionally we report data in written form, usually by numbers arranged in tables. Aproperly prepared graph can report data in a visual form. Seeing a picture of data can helpmanagers deal with the problem of too much data and too little information. Whether theneed is to inform or to persuade, graphs are an efficient way to communicate because they
illustrate trends not obvious in a table
make conclusions more striking
insure maximum impact.Graphs can be a great help not only in the presentation of information but in the analysis of data as well. This article will focus on their use in presentations to the various audienceswith which the finance analyst or manager must communicate. We will discuss severalrelated topics as well.
Use Graphs to Draw Attention to the Most Important
Studies show that the human mind can absorb and comprehend a graph more easily than abland array of figures. If a picture is worth a thousand words, then surely a graph is wortha thousand numbers. But, like numbers, to communicate effectively a graph must presentfairly the facts under discussion.
Fairness of Presentation
No professional would present an audience with a table of data and make a claim that thedata meant the opposite of what could be discerned from the table. Similarly, every graphmust fairly present the data from which it is constructed. Fairness of presentation exists
when a graph is:•honest•
able to attract and hold attention.
In this context,
can be defined as the faithfulness with which a graph actuallyrepresents what you purport it to represent. Without honesty, conclusions drawn from agraph are likely to be flawed or out-and-out false. You will find guidelines for avoidingsome of the worst errors later in this article.