Guide · 6 min read

Excel Formulas Every Business Student Needs

Most Excel assignments need a short list of functions used well. Learn the reference rules first, then lookups, conditions, financial and statistical functions, and how to lay out a model that a marker can follow.

Good habits before any formula

Marks in Excel assignments depend as much on structure as on correct answers. Five habits prevent most problems.

  1. Keep inputs separate. Put assumptions such as prices, rates and tax in labeled input cells, not inside formulas. Change an input and everything updates.
  2. Use cell references, not typed numbers. A formula such as =B2*1.08 hides a tax rate. Put 8 percent in a cell and use =B2*(1+$F$1).
  3. Be consistent. A column should contain the same formula in every row, so it can be filled down without errors.
  4. Label everything. Headings, units and a short notes area explain what the model does.
  5. Check as you go. Add a check cell, such as totals that must equal another total, so errors show up immediately.

To let a marker see your formulas, press Ctrl + ` (the backtick key) to toggle formula view, or add a column that shows them as text.

Relative, absolute and mixed references

This is the single most useful concept to master. When you copy a formula, relative references shift and absolute references stay fixed.

TypeLooks likeWhen copied down or acrossUse when
RelativeB2Changes row and columnCalculating row by row
Absolute$B$2Never changesPointing at a single input, such as a tax rate
Mixed (column fixed)$B2Row changes, column staysMultiplying a column of values by a row of rates
Mixed (row fixed)B$2Column changes, row staysMultiplying a row by a column of values

Press F4 while the cursor is in a reference to cycle through the four types. A classic error is copying =B5*F1 down a column, which makes the tax rate move to F2, F3 and so on. Write it as =B5*$F$1.

Core calculation and summary functions

TaskFormulaExample result
Total=SUM(E2:E6)Adds a range
Average=AVERAGE(E2:E6)Mean of a range
Middle value=MEDIAN(E2:E6)Median
Count of numbers=COUNT(E2:E6)Counts numeric cells
Count of non-blank=COUNTA(A2:A6)Counts text or numbers
Highest or lowest=MAX(E2:E6), =MIN(E2:E6)Extremes
Round=ROUND(E2,2)To two decimals
Count with a condition=COUNTIF(B2:B6,"North")How many rows match
Sum with conditions=SUMIFS(E2:E6,B2:B6,"North",A2:A6,"Widget")Adds only matching rows
Average with a condition=AVERAGEIFS(E2:E6,A2:A6,"Gadget")Mean of matching rows
Sum of products=SUMPRODUCT(C2:C6,D2:D6)Units times price, summed

Sample data and results

ProductRegionUnitsPriceRevenue (=C x D)
WidgetNorth120253,000
WidgetSouth80252,000
GadgetNorth60402,400
GadgetSouth90403,600
WidgetEast50251,250
  • Total revenue =SUM(E2:E6) gives 12,250, and =SUMPRODUCT(C2:C6,D2:D6) gives the same result in one step.
  • North revenue =SUMIFS(E2:E6,B2:B6,"North") gives 5,400.
  • Widget revenue =SUMIFS(E2:E6,A2:A6,"Widget") gives 6,250.
  • Number of North rows =COUNTIF(B2:B6,"North") gives 2.
  • Average Gadget revenue =AVERAGEIFS(E2:E6,A2:A6,"Gadget") gives 3,000.

Logical functions

IF lets a spreadsheet make decisions. Its structure is =IF(test, value if true, value if false).

TaskFormula
Simple test=IF(E2>=3000,"High","Low")
Several conditions at once=IF(AND(C2>=100,D2<=30),"Bulk","Standard")
Either condition=IF(OR(B2="North",B2="East"),"Priority","Normal")
Multiple outcomes=IFS(E2>=3000,"A",E2>=2000,"B",TRUE,"C")
Trap and replace errors=IFERROR(E2/C2,0)

IFS needs Excel 2019 or later. For older versions nest IF functions: =IF(E2>=3000,"A",IF(E2>=2000,"B","C")). Always test the boundaries, such as exactly 3,000, and decide whether the cut-off is greater than or greater than or equal to.

Lookup functions

Lookups pull a value from a table based on a key, such as a price from a price list. XLOOKUP is the modern choice, and VLOOKUP and INDEX with MATCH are widely taught.

FunctionSyntaxNotes
XLOOKUP=XLOOKUP(lookup_value, lookup_range, return_range, "Not found")Looks in any direction, exact match by default, Excel 365 and 2021
VLOOKUP=VLOOKUP(lookup_value, table, column_number, FALSE)Key must be the left column; FALSE means exact match
INDEX and MATCH=INDEX(return_range, MATCH(lookup_value, lookup_range, 0))Flexible and works in all versions

The most common VLOOKUP mistake is leaving off the final FALSE, which makes Excel use an approximate match and return wrong values without an error. Approximate matches are useful for tiered tables, such as tax bands or commission rates, where the table is sorted in ascending order.

A tiered commission (hypothetical)

Commission rates: 2 percent on sales from 0, 3 percent from 10,000 and 5 percent from 25,000. Put the thresholds (0, 10,000, 25,000) in one column and the rates beside them. For sales of 18,000 in B2:

=VLOOKUP(B2, $F$2:$G$4, 2, TRUE)           returns 3%
=XLOOKUP(B2, $F$2:$F$4, $G$2:$G$4, , -1)   returns 3%  (-1 means next smaller)
Commission =B2 * rate                      = 18,000 x 3% = 540

The same result with nested IF is =IF(B2>=25000,0.05,IF(B2>=10000,0.03,0.02)). A lookup table is easier to update and to audit, which markers like.

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Financial functions

TaskFormulaNotes
Loan payment=PMT(rate/12, years*12, loan)Returns a negative number because it is a payment
Future value=FV(rate, nper, pmt, pv)Sign convention: outflows negative
Present value=PV(rate, nper, pmt, fv)
Number of periods=NPER(rate, pmt, pv, fv)
Interest rate=RATE(nper, pmt, pv, fv)
Net present value=NPV(rate, future_cash_flows) + initial_outlayNPV assumes the first cash flow is at period 1
Internal rate of return=IRR(all_cash_flows_including_time_0)Needs at least one negative and one positive flow
Straight-line depreciation=SLN(cost, salvage, life)

See our guides on time value of money and capital budgeting for how these functions fit into problems.

Statistical functions

TaskFormula
Sample standard deviation=STDEV.S(range)
Sample variance=VAR.S(range)
Correlation=CORREL(x_range, y_range)
Regression slope and intercept=SLOPE(y_range, x_range), =INTERCEPT(y_range, x_range)
R-squared=RSQ(y_range, x_range)
Predicted value from a line=FORECAST.LINEAR(x, y_range, x_range)
t-test p-value=T.TEST(range1, range2, 2, 3)
Normal probability=NORM.S.DIST(z, TRUE) or =NORM.DIST(x, mean, sd, TRUE)

The Data Analysis ToolPak (switched on under Add-ins) produces descriptive statistics, regression tables, t-tests and ANOVA in one go. It gives static output, so rerun it if the data change.

Lay out a model so someone else can follow it

A tidy workbook earns marks. A common layout has three areas, either as separate sheets or clearly marked blocks.

AreaContentsTips
Inputs and assumptionsEvery number that could change, with units and a source noteUse one color for inputs, such as blue text, and keep them together
CalculationsFormulas that use the inputs, row by rowOne formula per column, filled down, no typed numbers
OutputsSummary tables, charts and the answer to the questionLink to calculations and label clearly
Checks and notesReconciliations, error flags and a short descriptionA check that shows OK or ERROR is easy to review
  • Freeze header rows View, Freeze Panes, so labels stay visible.
  • Format numbers Currency, percentages and decimals matched to the data.
  • Data validation Restrict inputs to sensible values using drop-down lists.
  • Conditional formatting Highlight exceptions, such as negative cash balances.
  • Name key ranges Named ranges such as TaxRate make formulas readable.
  • Protect formulas if asked Lock the calculation cells and leave inputs editable.

Fixing common error messages

ErrorMeaningTypical fix
#DIV/0!Division by zero or an empty cellCheck the denominator, or wrap in IFERROR or IF
#N/AA lookup found no matchCheck spelling, spaces and data types, and use an exact match
#REF!A reference was deletedUndo the deletion or rebuild the formula
#VALUE!Wrong kind of data, such as text in a calculationConvert text to numbers; check for stray spaces
#NAME?Excel does not recognize a name or functionCheck spelling and whether the function exists in your version
#####The column is too narrowWiden the column

A circular reference warning means a formula refers to itself. Trace precedents with the Formula Auditing tools. Another frequent hidden problem is numbers stored as text, which look fine but do not add. Look for a small green triangle and convert them.

If you want help building or checking a model, you can order an Excel assignment and upload your instructions and any starting file.

Quick answers

VLOOKUP or XLOOKUP?

Use whichever your course teaches. XLOOKUP is easier and more flexible but needs a recent Excel. VLOOKUP and INDEX with MATCH work in every version.

Why does my formula change when I copy it?

Because of relative references. Put dollar signs on any cell that should stay fixed, for example $B$2, or press F4 to toggle.

How do I show my formulas to a marker?

Press Ctrl + ` to toggle formula view, or add a column showing the formula with FORMULATEXT. Submit the workbook with the formulas intact, not pasted values.

What is the difference between COUNT and COUNTA?

COUNT counts cells containing numbers. COUNTA counts every non-empty cell, including text.

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