5 Terms/Formulas Every Ms Excel Users Should Know

MS Excel is a spreadsheet tool that was created by Microsoft in 1985 with the primary intention of assisting businesses in compiling all of their financial data, as well as yearly credit and debit sheets. Fast forward 31 years, and it is now the most widely used program for making graphs and pivot tables. In this post, we’ll go over the most important formulas in MS Excel, as well as an overview of how to use them and other key features.

a.  Why is MS Excel important?

MS Excel is a famous spreadsheet tool that allows you to record data in tables. In an Excel spreadsheet, data analysis is simple. Every financial analyst spends far more time in Excel than he or she would like to acknowledge. We’ve listed the most significant and complex Excel formulae that every world-class financial analyst should know based on years of expertise.

Microsoft Excel is a significant computer programmes because of the critical function it plays in a variety of industries. It is the most widely used spreadsheet programme in a lot of business set up as well as for personal data management and analysis. The first Ms Excel was introduced in the year of 1985. Ms Excel is used to run formula-based arithmetic calculations, as well as many other tasks which may require mathematical calculations. Excel has proven its popularity among various corporations, individuals, and institutions because of its ability to act as a visual basic for a variety of applications.

b.  5 Terms/Formulas Every MS Excel Users Should Know

c.   INDEX MATCH

The most popular tool in Excel for executing more sophisticated lookups is INDEX and MATCH. This is due to the fact that INDEX and MATCH are quite versatile, allowing you to perform horizontal and vertical lookups, 2-way lookups, left lookups, case-sensitive lookups, and even lookups based on several criteria. INDEX and MATCH should be on your Excel to-do list if you want to improve your skills.

The INDEX function in Excel is quite versatile and strong, and it’s used in a large number of Excel formulas, particularly sophisticated formulas. But what exactly does INDEX do? INDEX, in a nutshell, retrieves the value at a certain point in a range.

Source: Exceljet.net

How do we integrate the two functions in a single formula now that we’ve covered the fundamentals of INDEX and MATCH? Consider the information in the table below, which includes a list of salespeople as well as monthly sales figures for the months of January, February, and March.

Source: Exceljet.net

d.  IF combined with AND / OR

Formula: IF (AND (Something is True, Something else is True), Value if True, Value if False)

Formula: IF (OR (Something is True, Something else is True), Value if True, Value if False)

Anyone who has spent quite some time working with various sorts of financial models understands how difficult nested IF formulas can be. Combining the IF function with the AND or OR function can make calculations easier to audit and understand for other users. You can see how we combined the separate functions to create a more complicated formula in the example below.

Please check our free article on how to use IF with AND / OR in Excel for a complete explanation of how to use this function in Excel.

Source: corporatefinanceinstitute

e.   OFFSET combined with SUM or AVERAGE

Formula: =SUM (B4: OFFSET (B4,0,E2-1))

The OFFSET function isn’t extremely sophisticated on its own, but when combined with other functions like SUM or AVERAGE, we may produce a fairly complex formula. Consider the following scenario: you want to construct a dynamic function that can sum a variable number of cells. You are only capable of static calculation with the regular SUM formula, but by adding OFFSET, you can shift the cell reference around.

How it works is as follows: To make this formula work, we use the OFFSET function instead of the SUM function’s ending reference cell. This makes the formula dynamic, and you may tell Excel how many consecutive cells you want to add up in the cell labelled as E2. We now have a more complex Excel form.

This slightly more complicated formula is demonstrated in the screenshot below.

Source: corporatefinanceinstitute

The SUM formula begins in cell B4, but it finishes with a variable, which is the OFFSET formula, which begins in cell B4 and continues with the value in E2 (“3”), minus one. This shifts the sum formula’s finish over two cells, totalling three years of data (including the starting point). The sum of the cells B4:D4 is 15, as shown in cell F7, which is what the offset and sum formula provides us.

f.     CHOOSE

Formula: =CHOOSE (choice, option1, option2, option3)

The CHOOSE function is ideal for financial modelling scenario analysis. It gives you to choice from a set of possibilities and has the ability to return the “decision” you’ve made. Assume you have three distinct revenue growth forecasts for next year: 5%, 12%, and 18%. If you tell Excel you desire option #2, you can get a 12 per cent return using the CHOOSE formula.

Source: corporatefinanceinstitute

g.   XNPV and XIRR

Formula: =XNPV (discount rate, cash flows, dates)

These formulas will come in handy if you work in an investment banking, equity research, financial planning & analysis (FP&A), or any other area of corporate finance that needs discounting cash flows.

Simply said, XNPV and XIRR allow you to apply precise dates to each discounted cash flow. The standard NPV and IRR formulae in Excel have the flaw of assuming that the time intervals between cash flows are equal. As an analyst, you’ll encounter instances where cash flows aren’t evenly spaced on a regular basis, and this formula is how you correct it.

Source: corporatefinanceinstitute

h. SUMIF and COUNTIF

Formula: =COUNTIF (D5:D12,”>=21″)

Conditional functions are used effectively in these two advanced formulations. All cells that meet specified requirements are added in SUMIF, and all cells that meet certain criteria are counted in COUNTIF. For example, suppose you want to find out how many bottles of champagne you need for a client event by counting all cells that are greater than or equal to 21 (the legal drinking age in the United States). As demonstrated in the screenshot below, COUNTIF can be used as an advanced solution.

Source: corporatefinanceinstitute

i.     PMT and IPMT

Formula: =PMT (interest rate, # of periods, present value)

You’ll need to know these two formulas if you work in commercial banking, real estate, FP&A, or any other financial analyst role that works with debt schedules.

The PMT formula calculates the value of making equal payments throughout the course of a loan’s life. You can use this formula in conjunction with IPMT (which shows you how much interest you’ll pay on the same type of loan), then separate principal and interest payments.

Here’s how to use the PMT formula to calculate the monthly mortgage payment for a $1 million loan with a 5% interest rate over 30 years.

Source: corporatefinanceinstitute

j.     Conclusion

Microsoft Excel is a famous spreadsheet programme that is part of the Microsoft Office suite. Spreadsheets contain values organized in rows and columns that can be updated numerically using both simple and advanced arithmetic operations. Microsoft Excel is a computer programme that allows you to create electronic spreadsheets. You can learn a lot more about important advanced formulas of Ms Excel through various advanced excel courses available online on various websites.

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