Formula vs Function

Comparing Formula vs Function in Excel

Written by CFI Team

Read Time 2 minutes

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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.

Formula vs Function Diagram

Key Highlights

Formulas are created equations, while functions are pre-defined calculations on a spreadsheet.
When an Excel user types an = sign in an Excel cell, he or she is starting to create a formula.
When an Excel user types an = sign followed by a predesigned set of letters or clicks on the Fx button in the formula bar, a function begins to be implemented.

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)

Formula vs Function Example in Excel

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:

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Formula vs Function