In the present world scenario, data processing has become extremely important for many professionals. One of the leading professionals who have benefited from data processing, particularly excel data processing, is finance professionals. This blog will brief you on some of the critical excel functions helpful in solving financial problems. An important point to remember during excel data processing is that we can use some functions independently and other functions as a combination.
This function helps finance professionals calculate the actual annual interest rate in case of non-annual compounding. Professionals handling lending and borrowing-related activities are those who mainly use this function.
The XIRR function helps us to ascertain the internal rate of return for a group of cash flows on specified dates. This function is very important for finance professionals.
In this function, IRR undergoes modification. Calculated using the formula MIRR (cash flows, cost of borrowing, reinvestment rate), ‘M’ denotes modified. You can use this formula if you wish to invest the returns from one investment in another. One of the simplest examples from daily life to understand this concept is investing the returns from a privately run business in a government bond.
Finance professionals who do financial modeling for real estate firms will know more about this formula. Once you have the interest rate, the number of years/ months or any other period, and the amount borrowed sum, say, mortgage, you can calculate the value of the mortgage payment.
Using the formula (rate, current period #, total # of periods, present value), this function helps us ascertain the interest of a fixed amount of debt. This function works perfectly well with PMT. Separating interest payments for every period will give you the principal amount you must pay every time.
This is another crucial excel function used by finance professionals. It helps us calculate the depreciation expense of every period. Analysts involved in financial modeling generally come up with depreciation schedules independently.
Do you feel like learning more? These days, we can see a lot of books and videos that will help anyone know more about excel data processing. Make sure you utilize those resources to the maximum to become an expert in the data processing. So, which of the above functions do you think will be most helpful for you at work?