An Excel drop down list[1] is a data validation function that allows users to select an option from a list of choices. It can be particularly useful in performing financial modeling and analysis by incorporating scenarios and making a spreadsheet more dynamic.
Below are step-by-step instructions on how to build a drop down list in Excel:
Step 1: Create a List of Options
Make a vertical list of options you want users to be able to choose from. As you can see in our simple example, we have created a list of cities from around the world.
Step 2: Pick a Cell and Access Data Validation on the Ribbon
Pick a cell where you want the Excel drop down list to be located and use the ribbon to access the Data Validation function, which is located on the Data ribbon. The keyboard shortcut on a Windows computer is Alt, A, V, V.
Step 3: Select “List” and Link the Data
When the data validation dialogue box appears, you will need to select “List” where it asks you what you want to “Allow” in the cell.
Once that is done, you can select the data you want to include as the options that will appear in the list. In our example, the options are the cities listed in cells B5:B13.
You may wish to change the background color of the cell that contains the list or add a border to it so users can easily identify it.
When you’re done, start playing around with the cool new feature you’ve created!
Financial Modeling Applications
In financial modeling and valuation, an Excel drop down list can be very useful for creating scenarios that run through the model.
In CFI’s financial modeling courses, there is commonly a set of scenarios that a financial analyst will use to compare various alternatives for a business.
Thank you for reading CFI’s guide to using an Excel drop down list to make your Excel models more dynamic. To continue advancing your career as a financial analyst these additional CFI resources will be helpful.