# Using Excel in Financial Modelling

In this chapter, we take a look at some of the practical tools, functions, and formulas commonly used in financial modelling in Excel.

# FORMULAS AND FUNCTIONS IN EXCEL

Excel contains over 300 different formula codes, called functions. The most commonly known function is the SUM, used to total a range of cells. Most Excel users only use a very small percentage of the available functions, and many of them are irrelevant for use in finance and financial modelling. It is impossible to go over all of them, but here we will cover the ones that are going to be the most useful in using Excel for business analysis.

In most cases, you will find it easiest to use the Function Wizard, accessible via the Insert Function button on the Formula tab. See Figures 5.1 and 5.2.

FIGURE 5.1 Function Wizard FIGURE 5.2 Formula Builder in Excel for Mac 2011 Note that the Function Wizard is called the Formula Builder in Excel for Mac 2011; however we will refer to it as the Function Wizard in future for simplicity.

It’s fair to say that some Excel users are 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 ...

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