Easy-to-follow video tutorials help you learn software, creative, and business skills.Become a member

Avoiding common mistakes

From: Excel 2007: Financial Analysis

Video: Avoiding common mistakes

It's amazing how many errors can creep into even the simplest worksheets. Most often the errors come from actions that seem very logical when you take them, but result in formulas that give you the wrong answers. Something you should avoid is using numbers as column headers. Instead, qualify the values with text to specify the type of data you're working with. For example, use FY 2009 for Fiscal Year 2009, and CY 2009 for Calendar Year 2009, and I'll show you why that could be a problem. In this worksheet, we have a Sales Summary by Region, North America, South America and so on, and we have the sales numbers here.

Avoiding common mistakes

It's amazing how many errors can creep into even the simplest worksheets. Most often the errors come from actions that seem very logical when you take them, but result in formulas that give you the wrong answers. Something you should avoid is using numbers as column headers. Instead, qualify the values with text to specify the type of data you're working with. For example, use FY 2009 for Fiscal Year 2009, and CY 2009 for Calendar Year 2009, and I'll show you why that could be a problem. In this worksheet, we have a Sales Summary by Region, North America, South America and so on, and we have the sales numbers here.

But let's see what happens if I create an AutoSum formula in cell B10. So, the cell's clicked, I go up to the Home tab, click the AutoSum button. Let's take a look at the formula Excel is trying to create. You'll notice that it includes the year. That's because 2007 is a number, which means Excel cannot distinguish it from the other values in the column and it tries to include it in the formula. However, if we change the value in that cell to CY 2007, I'll delete the formula and create a new AutoSum, because CY starts with text, Excel does not recognize it as a number, and it correctly creates the AutoSum formula with the cells B5 through B9.

Press Enter and there you have the correct result. Another error to avoid is hard-coding values in formulas. Move to this worksheet and you see that I have a loan, Principal of $10 million, Interest Rate of 6% and a Term of 12 years. Here's the formula that calculates the Monthly Payment. I'll click that so you can see the formula in the Formula bar. Now, you'll notice that I have the interest rate of 6% hard-coded into the formula. Instead of using a cell reference, we have the cell here B4 with the interest rate.

So, if I press Escape to get out of formula editing mode and change the value in B4 to 5%, the payment doesn't change, even though the interest rate changed. It should have gone down, because you're not paying as much interest in each payment. So what I should do, I'll change this back to 6%, is edit the formula so that it refers to the cell that contains the interest rate. So, I'll change the reference there to cell B4 and both of the other arguments, the number of periods, and the loan principal already used Cell References, so I don't need to change them.

I'll press Enter, there we have the value. Now when I change the interest rate to 5%, the payment will change. One final common mistake that Excel users make is creating formulas that cannot be copied accurately. They change Cell References when you move them. In this worksheet, I have calculations for monthly payments for two separate loans. One for a Factory Update and one for Storage Construction. This is an example of bad design. I have the principal and the term for each loan listed separately and instead of having the rate in a separate place entirely, I should have it here with the principal and the term for the two loans.

It's just an example of good design and you'll see why in a second. So, here I have the formula for the Payment for the Factory Update Loan and everything looks good. What I'll do now is copy that formula so that it works for the Storage Construction Loan. Now, there is no obvious error, but if you were to run these calculations you would find that there is actually an interest rate of 0% being applied to this loan. You can determine that by going up to the formula bar, where we have Payment and then D3.

Now, cell D3 is the cell from which Excel is attempting to draw the interest rate for this loan, but you'll note that it's empty. The interest rate that you want is over in cell B3. The mistake happened because when you copy a formula from one cell to another, if you don't do anything special to these Cell References, Excel figures, oh! you want me to shift all the Cell References as far up-and-down or left-and-right in the worksheet as you shifted the formula when you copied and pasted it.

So, if you compare the two formulas, here we have D3, D8, and D7, and here, we have B3, B8, and B7. The change occurred when we copied the formula from here to here. So, how do you keep cell B3 constant in this formula? That's again where the interest rate is. I'll delete this to show you what happens when you copy it. What you need to do is click on the formula argument with the cell that you want to remain constant and press F4.

Pressing F4 adds dollar signs in front of the column and the row. What the $ means is that the reference which was a relative reference and capable of changing has now become an absolute reference. That means it will not change. So in this case, both the row and the column will stay the same. If you press F4 again, now the column can change but the row can't. If you press it again, the column will not change but the row can. If you press it again, you're back to the relative reference at the start, where both the column and the row can change.

So, pressing F4 to edit the Cell Reference, so it will not change. Press Enter to keep the formula and now when we copy it, you get what turns out to be the right result. By following these strategies you'll avoid the most common spreadsheet errors and be well on your way to creating usable and accurate worksheets.

Show transcript

This video is part of

Image for Excel 2007: Financial Analysis
Excel 2007: Financial Analysis

51 video lessons · 14308 viewers

Curt Frye
Author

 
Expand all | Collapse all
  1. 2m 6s
    1. Welcome
      1m 8s
    2. Using the exercise files
      32s
    3. Disclaimer
      26s
  2. 13m 20s
    1. Separating inputs and formulas
      2m 2s
    2. Avoiding common mistakes
      5m 39s
    3. Tracing formula precedents and dependents
      2m 52s
    4. Evaluating Excel formulas step by step
      2m 47s
  3. 18m 40s
    1. Tracking income and expenses using an Excel table
      3m 29s
    2. Creating a Pivot Table from table data
      3m 36s
    3. Pivoting a Pivot Table
      2m 22s
    4. Filtering a Pivot Table
      3m 11s
    5. Adding Pivot Table columns to enhance data analysis
      3m 5s
    6. Tracking cash flow using a Pivot Chart
      2m 57s
  4. 18m 48s
    1. Reading a corporate financial statement
      6m 1s
    2. Introducing common-sizing strategies for analyzing financial statements
      3m 59s
    3. Creating common-sized income statements
      3m 1s
    4. Creating common-sized balance sheets
      2m 53s
    5. Calculating percentage changes in financial statements
      2m 54s
  5. 8m 12s
    1. Calculating earnings per share
      1m 54s
    2. Calculating return on equity and return on assets
      2m 50s
    3. Calculating gross profit margin and net profit margin
      3m 28s
  6. 6m 19s
    1. Calculating the current ratio and quick ratio
      2m 47s
    2. Calculating the average collection period
      1m 56s
    3. Calculating inventory turnover
      1m 36s
  7. 6m 12s
    1. Calculating the equity ratio
      1m 26s
    2. Calculating the debt ratio
      2m 57s
    3. Calculating the times interest earned ratio
      1m 49s
  8. 10m 58s
    1. Calculating simple interest and compound interest
      3m 36s
    2. Applying nominal versus effective interest rates (APR versus APY)
      3m 21s
    3. Calculating the number of days between events
      4m 1s
  9. 13m 32s
    1. Computing the future value of an investment
      3m 30s
    2. Calculating present value
      2m 29s
    3. Calculating net present value
      2m 42s
    4. Calculating internal rate of return
      2m 24s
    5. Calculating NPV and IRR for uneven input periods (XNPV and XIRR)
      2m 27s
  10. 7m 30s
    1. Projecting future results using the Forecast function
      2m 9s
    2. Performing quick forecasts using the Fill handle
      2m 57s
    3. Adding a trendline to a chart
      2m 24s
  11. 22m 28s
    1. Introducing amortization
      2m 20s
    2. Calculating payments on a fully amortized loan
      2m 21s
    3. Calculating payments on a partially amortized loan (balloon payments)
      2m 4s
    4. Calculating interest and principal components of loan repayments
      5m 32s
    5. Introducing depreciation
      2m 1s
    6. Calculating straight line depreciation
      1m 30s
    7. Calculating declining balance depreciation
      3m 24s
    8. Calculating double declining balance depreciation
      3m 16s
  12. 9m 34s
    1. Introducing bonds and bond terminology
      1m 37s
    2. Calculating a bond's yield
      2m 15s
    3. Calculating the value of zero coupon bonds
      3m 18s
    4. Pricing bonds to be offered to investors
      2m 24s
  13. 23s
    1. Goodbye
      23s

Start learning today

Get unlimited access to all courses for just $25/month.

Become a member
Sometimes @lynda teaches me how to use a program and sometimes Lynda.com changes my life forever. @JosefShutter
@lynda lynda.com is an absolute life saver when it comes to learning todays software. Definitely recommend it! #higherlearning @Michael_Caraway
@lynda The best thing online! Your database of courses is great! To the mark and very helpful. Thanks! @ru22more
Got to create something yesterday I never thought I could do. #thanks @lynda @Ngventurella
I really do love @lynda as a learning platform. Never stop learning and developing, it’s probably our greatest gift as a species! @soundslikedavid
@lynda just subscribed to lynda.com all I can say its brilliant join now trust me @ButchSamurai
@lynda is an awesome resource. The membership is priceless if you take advantage of it. @diabetic_techie
One of the best decision I made this year. Buy a 1yr subscription to @lynda @cybercaptive
guys lynda.com (@lynda) is the best. So far I’ve learned Java, principles of OO programming, and now learning about MS project @lucasmitchell
Signed back up to @lynda dot com. I’ve missed it!! Proper geeking out right now! #timetolearn #geek @JayGodbold
Share a link to this course

What are exercise files?

Exercise files are the same files the author uses in the course. Save time by downloading the author's files instead of setting up your own files, and learn by following along with the instructor.

Can I take this course without the exercise files?

Yes! If you decide you would like the exercise files later, you can upgrade to a premium account any time.

Become a member Download sample files See plans and pricing

Please wait... please wait ...
Upgrade to get access to exercise files.

Exercise files video

How to use exercise files.

Learn by watching, listening, and doing, Exercise files are the same files the author uses in the course, so you can download them and follow along Premium memberships include access to all exercise files in the library.


Exercise files

Exercise files video

How to use exercise files.

For additional information on downloading and using exercise files, watch our instructional video or read the instructions in the FAQ .

This course includes free exercise files, so you can practice while you watch the course. To access all the exercise files in our library, become a Premium Member.

Join now Already a member? Log in

Are you sure you want to mark all the videos in this course as unwatched?

This will not affect your course history, your reports, or your certificates of completion for this course.


Mark all as unwatched Cancel

Congratulations

You have completed Excel 2007: Financial Analysis.

Return to your organization's learning portal to continue training, or close this page.


OK
Become a member to add this course to a playlist

Join today and get unlimited access to the entire library of video courses—and create as many playlists as you like.

Get started

Already a member ?

Become a member to like this course.

Join today and get unlimited access to the entire library of video courses.

Get started

Already a member?

Exercise files

Learn by watching, listening, and doing! Exercise files are the same files the author uses in the course, so you can download them and follow along. Exercise files are available with all Premium memberships. Learn more

Get started

Already a Premium member?

Exercise files video

How to use exercise files.

Ask a question

Thanks for contacting us.
You’ll hear from our Customer Service team within 24 hours.

Please enter the text shown below:

The classic layout automatically defaults to the latest Flash Player.

To choose a different player, hold the cursor over your name at the top right of any lynda.com page and choose Site preferences from the dropdown menu.

Continue to classic layout Stay on new layout
Exercise files

Access exercise files from a button right under the course name.

Mark videos as unwatched

Remove icons showing you already watched videos if you want to start over.

Control your viewing experience

Make the video wide, narrow, full-screen, or pop the player out of the page into its own window.

Interactive transcripts

Click on text in the transcript to jump to that spot in the video. As the video plays, the relevant spot in the transcript will be highlighted.

Thanks for signing up.

We’ll send you a confirmation email shortly.


Sign up and receive emails about lynda.com and our online training library:

Here’s our privacy policy with more details about how we handle your information.

Keep up with news, tips, and latest courses with emails from lynda.com.

Sign up and receive emails about lynda.com and our online training library:

Here’s our privacy policy with more details about how we handle your information.

   
submit Lightbox submit clicked
Terms and conditions of use

We've updated our terms and conditions (now called terms of service).Go
Review and accept our updated terms of service.