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What’s the difference between a Formula and a Function in Excel?

26 May, 2009

Ever been guilty of using Excel as a fancy calculator?  If so, you’d be just using a formula in Excel - such as =A1+A2 or =452*12.

There are, however, pre-defined formulas in Excel such as IF, SUM, VLOOKUP, INDEX (and about 300 more!)  These are referred to as functions.

 So, you could write a formula containing a function eg. =MAX(A1:B20) or you could just write a simple formula which does not contain a function eg. =A1/A2.

Mastering the use of functions in formulas is a key skill in learning Financial Modelling.  Happy formula-writing!



1. Daniel Chow Says:

May 26th, 2009 at 6:56 pm edit

Hey - just so you know - you do not need to become a member of Finance 3.0 in order to view this discussion, or other discussions and blogs on the website.

You would only need to register to respond to discussions, download attachments (such as Excel templates and PDF documents), write blog posts, and access other applications and features available only to members.
2. Danielle Stein Fairhurst Says:

May 26th, 2009 at 8:13 pm edit

Thanks Daniel. Toby has posted some useful PDFs on the subject. Becoming a member is free anyway and I highly recommend it!
3. Rickard Warnelid Says:

May 27th, 2009 at 4:28 pm edit

Hi Danielle,

I agree that this is a topic that people often get confused about so thanks for clarifying.

I also like that you write ‘formulas’ instead of ‘formulae’! I haven’t really had the confidence to use ‘formulas’ at all times, but will do from now on.

4. rayalukkv Says:

July 7th, 2009 at 1:18 am edit

do explain how the excel tax calculator works
what is the formula in the column “d”
which hided
5. Danielle Stein Fairhurst Says:

July 7th, 2009 at 10:27 am edit

That file is protected, if you would like the password, please email. With the password, you can unhide the column and see what the formula is doing. This file was built to demonstrate the use of a progressive tiering formula in financial modelling.

This file can be downloaded at www.plumsolutions.com.au/articles/20082009-excel-income-tax-calculator.

Submitted by danielle on Thu, 20/08/2009 - 16:11.


What is the difference between function and formula in excel?

Please send an answer with example.




& Regards

Basavaraj K H

Submitted by Basavaraj K H (not verified) on Tue, 05/06/2012 - 22:12.

Hi Basavaraj,

A function would be something like =SUM(A1:A2) whereas a formula would simply be =A1+A2.  In order to be using a function, you need to use the predefined functions created in Excel, not just a mathematical calculation.

I hope that makes sense!


Submitted by danielle on Wed, 06/06/2012 - 20:03.

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