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Use of Excel
Formulae Functions
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Learning Objectives
After going through this chapter you will be familiar with:
– Need for formulae
– Formula linking.
– Use of direct formulae
– Formula evaluation
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Need of formulae
• Formulae are required for building the logic of the model in
Excel. They are also required for projecting numbers based on
certain assumptions.
• Formulae allow us to build dynamic models that can change
depending on changing circumstances.
• Excel automatically calculates and shows the value of the
formulae in its cells.
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Formulae in Excel
The following example shows the Actual Revenues and Cost of Revenues for the company ABC for the year
2001 and the calculated values of the same for the year 2002. We have done this by forecasting the 2002
Revenues by keeping the year over year growth of quarterly numbers the same. The Cost of Revenues is
forecasted as a % of Revenues. While excel is showing numbers in its cells, we have actually entered the
formulae. The numbers have been calculated automatically.
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Formulae in Excel
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Formula Linking
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Use of direct formulae
Various functions are available in excel. Some of them are
enlisted below:
– Sum
– Average
– Absolute
– Mean
– Max
– Min
– Sumproduct etc.
One ends up using several other functions while building models and
we will come across a few of these as we move ahead with the topics.
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Formula evaluation
Formula evaluation feature helps us navigate through each part of the formula and
test if the links are correct.
This can also be done by tracing the formula by hitting F2 at the cell whose
formula we want to test. We can activate the formula evaluation box when we hit
the last menu in the formula auditing toolbar.
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Thank You.
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