Excel for Finance

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 14, 2024

Microsoft Excel is an indispensable tool in the world of finance, offering a vast array of functions and formulas that can simplify financial analysis, budgeting, forecasting, and much more.

This guide will walk you through some of the most essential Excel functions and formulas for finance, including how and when to use them.

Getting Started with Basic Financial Functions

PV (Present Value)

The PV function calculates the present value of a loan or investment, based on a constant interest rate and a series of future payments (negative values) and income (positive values).

=PV(rate, nper, pmt, [fv], [type])

  • rate: The interest rate per period.
  • nper: The total number of payment periods.
  • pmt: The payment made each period; it cannot change over the life of the annuity.
  • fv: (Optional) The future value, or a cash balance you want to attain after the last payment is made.
  • type: (Optional) When payments are due. 0 = end of the period, 1 = beginning of the period.

FV (Future Value)

The FV function calculates the future value of an investment based on periodic, constant payments and a constant interest rate.

=FV(rate, nper, pmt, [pv], [type])

  • rate, nper, pmt, type: As defined in the PV function.
  • pv: (Optional) The present value, or the total amount that a series of future payments is worth now.

NPV (Net Present Value)

The NPV function calculates the net present value of an investment based on a series of future cash flows and a discount rate. It's essential for assessing the profitability of a project.

=NPV(rate, value1, [value2], ...)

  • rate: The rate of discount over the length of one period.
  • value1, value2, ...: Specifies the cash flows in the series. Value1 is required, subsequent values are optional.

Loan and Investment Formulas

PMT (Payment)

The PMT function calculates the payment for a loan based on constant payments and a constant interest rate.

=PMT(rate, nper, pv, [fv], [type])

IPMT (Interest Payment)

The IPMT function calculates the interest payment for a given period for an investment based on periodic, constant payments and a constant interest rate.

=IPMT(rate, per, nper, pv, [fv], [type])

  • per: The period for which you want to find the interest and must be in the range 1 to nper.

PPMT (Principal Payment)

The PPMT function calculates the payment on the principal for a given period for an investment based on periodic, constant payments and a constant interest rate.

=PPMT(rate, per, nper, pv, [fv], [type])

Date and Time Functions for Financial Analysis

EDATE

The EDATE function returns the serial number of the date that is the indicated number of months before or after a specified date (the start_date).

=EDATE(start_date, months)

YEARFRAC

The YEARFRAC function calculates the fraction of the year represented by the number of whole days between two dates.

=YEARFRAC(start_date, end_date, [basis])

  • basis: (Optional) The type of day count basis to use.

Statistical Functions for Financial Data

XIRR (Internal Rate of Return)

The XIRR function calculates the Internal Rate of Return for a series of cash flows that may not be periodic.

=XIRR(values, dates, [guess])

XNPV (Net Present Value)

The XNPV function calculates the net present value for a series of cash flows that occur at irregular intervals.

=XNPV(rate, values, dates)

Using Lookup Functions in Financial Analysis

VLOOKUP and HLOOKUP

VLOOKUP and HLOOKUP are essential for searching for specific data in large datasets. VLOOKUP searches for a value in the first column of a range and returns a value in the same row from a specified column. HLOOKUP searches for a value in the first row and returns a value in the same column from a specified row.

=VLOOKUP(lookup_value, table_array, col_index_num, [range_lookup])
=HLOOKUP(lookup_value, table_array, row_index_num, [range_lookup])

Advanced Financial Analysis with Array Formulas

Array formulas can perform multiple calculations on one or more items in an array. They can return either a single result or multiple results. Array formulas are powerful tools for complex financial analysis, such as simultaneous calculations on ranges of data for scenario analysis.

To enter an array formula, type your formula in the cell, then press Ctrl+Shift+Enter instead of just Enter. Excel will encase your formula in curly braces {}.

Conclusion

Excel's vast array of functions and formulas can significantly enhance your financial analysis and decision-making capabilities.

By mastering these tools, you can efficiently perform complex calculations, analyze financial data, and generate insightful reports.

Practice is key to becoming proficient in Excel for finance, so consider using these functions and formulas in your next financial project.


About the Author

True Tamplin, BSc, CEPF®

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True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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