What is the T-TEST Function?
The T-TEST Function is categorized under Statistical functionsFunctionsThe T-TEST Function is categorized under Statistical functions. It will calculate the probability that is associated with a Student’s t-test. It is commonly used to test the difference between two small sample sizes, specifically the difference between the samples when the variances of two normal distributions. It will calculate the probability that is associated with a Student’s T-Test. The function is commonly used to test the probability of two samples have underlying populations with the same mean.
In financial analysisFinancial Analyst Job DescriptionSee a real Financial Analyst Job Description including all the skills, experience, and education required to be the successful candidate for the job. Perform financial forecasting, reporting, and operational metrics tracking, analyze financial data, create financial models, suppose we wish to understand the amount spent by Europeans and Americans on food. We cannot practically record the spending habits of every European and American, so we would take a sample of the entire population. In such scenario, T-test will help us find the answer to the question on whether the difference in food spending of the two groups is representative of a true difference between Europeans and Americans in general or if it is just a meaningless statistical difference.
Formula
=T.TEST(array1,array2,tails,type)
The formula uses the following arguments:
- Array1 (It is a required argument) – It is the first data set.
- Array2 (It is a required argument) – It is the second data set.
- Tails (It is a required argument) – It specifies the number of distribution tails. If tails = 1, T-TEST uses the one-tailed distribution. If tails = 2, T-TEST uses the two-tailed distribution.
- Type (It is a required argument) – It is the types of test to perform.
How to use the T-TEST Function in Excel?
To understand the uses of the T.TEST function, let’s consider a few examples:
Example 1 – Perform a T-Test calculation in Excel
Suppose we are given the following data on the money spent by households in Europe and the US.
The probability associated with the Student’s paired t-test with a one-tailed distribution for the two arrays of data above can be calculated using the Excel function. The formula used is as follows:
We get the result below:
Things to remember about the T-TEST Function
- #NUM! error – Occurs when:
- The given tails argument has any value other than 1 or 2.
- The given type argument is not equal to 1,2 or 3.
- #N/A! error – Occurs when the two supplied arrays are of different lengths.
- #VALUE error – Occurs when either the given tails argument or the supplied type argument is non-numeric.
Click here to download the sample Excel file
Additional resources
Thanks for reading CFI’s guide to important Excel functions! By taking the time to learn and master these functions, you’ll significantly speed up your financial analysis. To learn more, check out these additional resources:
- Excel Functions for FinanceExcel for FinanceThis Excel for Finance guide will teach the top 10 formulas and functions you must know to be a great financial analyst in Excel. This guide has examples, screenshots and step by step instructions. In the end, download the free Excel template that includes all the finance functions covered in the tutorial
- Advanced Excel Formulas Course
- Advanced Excel Formulas You Must KnowAdvanced Excel Formulas Must KnowThese advanced Excel formulas are critical to know and will take your financial analysis skills to the next level. Advanced Excel functions you must know. Learn the top 10 Excel formulas every world-class financial analyst uses on a regular basis. These skills will improve your spreadsheet work in any career
- Excel Shortcuts for PC and MacExcel Shortcuts PC MacExcel Shortcuts - List of the most important & common MS Excel shortcuts for PC & Mac users, finance, accounting professions. Keyboard shortcuts speed up your modeling skills and save time. Learn editing, formatting, navigation, ribbon, paste special, data manipulation, formula and cell editing, and other shortucts