Waterfall chart

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A typical waterfall chart

A waterfall chart is a form of data visualization that helps in understanding the cumulative effect of sequentially introduced positive or negative values. These intermediate values can either be time based or category based. The waterfall chart is also known as a flying bricks chart or Mario chart due to the apparent suspension of columns (bricks) in mid-air. Often in finance, it will be referred to as a bridge.

Waterfall charts were popularized by the strategic consulting firm McKinsey & Company in its presentations to clients.[1][2]

Complexity can be added to waterfall charts with multiple total columns and values that cross the axis. Increments and decrements that are sufficiently extreme can cause the cumulative total to fall above and below the axis at various points. Intermediate subtotals, depicted with whole columns, can be added to the graph between floating columns.

Overview[edit]

The waterfall, also known as a bridge or cascade, chart is used to portray how an initial value is affected by a series of intermediate positive or negative values. Usually the initial and the final values (end points) are represented by whole columns, while the intermediate values are shown as floating columns that begin based on the value of the previous column. The columns can be color-coded for distinguishing between positive and negative values.

Applications[edit]

A waterfall chart can be used for analytical purposes, especially for understanding or explaining the gradual transition in the quantitative value of an entity which is subjected to increment or decrement. Often, a waterfall or cascade chart is used to show changes in revenue or profit between two time periods.

A waterfall chart showing profitability analysis.
Waterfall chart showing profitability analysis

Waterfall charts can be used for various types of quantitative analysis, ranging from inventory analysis to performance analysis.

Waterfall charts are also commonly used in financial analysis to display how a net value is arrived at through gains and losses over time or between actual and budgeted amounts. Changes in cash flows or income statement line items can also be shown via a waterfall chart. Other non-business applications include tracking demographic and legal activity changes over time.

Inventory analysis using waterfall chart
Inventory analysis using waterfall chart

There are several sources for automatic creations of Waterfall Charts ( PlusX , Origin, etc.)

References[edit]

  1. ^ "How to Create a McKinsey-style waterfall chart". Idea transplant. 
  2. ^ Ethan M. Rasiel. The McKinsey Way. McGraw–Hill, 1999.