Formula vs Function

What is a Formula vs Function in Excel?

A Formula is an equation designed by a user in Excel, while a Function is a predefined calculation in the spreadsheet application. This guide will walk you through Formula vs Function[1] in Excel so you know exactly what the similarities and differences are.

Excel enables users to perform simple calculations such as finding totals for a row or column of numbers. Formulas and functions can be useful in more complex situations, including calculating mortgage payments, solving engineering or math problems, and creating financial models.

Examples of a Formula

When a user types an equals sign in a cell, they are starting to create a formula.

Examples of a formula include:

=4+3

=A3+C9

=B7+B8-(4*2)+1 [see screenshot below]

Examples of a Function

When a user types an equals sign followed by a predefined set of letters (or clicks on the Fx button in the formula bar), a function begins to be implemented.

=SUM(A3:A27)

=AVERAGE(F4:F8) [see screenshot below]

=NPV(0.12,A5:G5)

Examples of a Formula and Function

It doesn’t just need to be a case of formula vs function. Users can combine the two to create an even more powerful analysis.

Examples of the two combined are:

=SUM(A5:A8)/5

=AVERAGE(B3:B19)+25+SUM(1,2,3,5)

=NPV(0.12,A5:G5)*0.8

Formula vs Function in Practice

In common business practice, Excel users use the terms formula and function almost interchangeably. From a communication and comprehension perspective, there’s not a big difference. Just know that technically, a function is a piece of code that executes a predefined calculation, while a formula is something you create yourself.

Additional Resources

Thank you for reading this CFI guide to understanding Formula vs Function in Excel.

CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:

• List of Excel Shortcuts for PC & Mac
• List of Excel Functions
• Advanced Excel Training Course
• See all Excel resources