Calculating Ratios Using Excel: A Step-by-Step Guide

-

Calculating Ratios in Excel: Simple Methods and Formulas


Ratios are fundamental in various domains, from finance to everyday life. Whether analyzing financial data or specifying proportions, understanding how to calculate ratios in Excel is invaluable. While Excel doesn't have a built-in formula for ratios, there are straightforward workarounds to achieve this.

In this tutorial, we'll explore a couple of simple formulas and techniques to calculate ratios in Excel.

Tutorial Overview:

1. Calculate Ratios Using the GCD Function

2. Calculate Ratios Using Custom Number Formatting

3. Calculate Ratios Using the TEXT Function

Calculate Ratios Using the GCD Function:

When calculating ratios, finding the Greatest Common Divisor (GCD) is essential. Excel's GCD function simplifies this process for us. Here's how to do it:

Calculate the GCD for the given numbers.
Divide each number by the GCD to obtain simplified values.
Combine these values using the colon (:) to represent the ratio.



Calculate Ratios Using Custom Number Formatting:

Another method involves custom number formatting to display ratios directly. While this method shows ratios with a forward slash (/) instead of a colon (:), it's straightforward. Here's how:

Divide the numbers to get the ratio.
Apply custom number formatting to display the ratio.

Calculate Ratios Using the TEXT Function:

The TEXT function combined with SUBSTITUTE can also calculate ratios and format them as desired. Here's how it works:

Use the TEXT function to format the ratio.
Apply the SUBSTITUTE function to replace the forward slash (/) with a colon (:).
In conclusion, these methods offer flexibility in calculating and displaying ratios in Excel. Choose the one that best suits your needs and preferences.

Disclaimer: The methods described in this tutorial are intended for educational purposes only. Always verify the accuracy of your calculations and consult with financial professionals for complex financial analysis.

Comments

Post a Comment

Best Blogs

IB Interview Questions: M&A : Level 1 M&A Questions

-
Image
1. Why do companies merge? While are many reasons that companies merge the underlying driver of most M&A deals to expedite growth and/or generate cost savings to create value for the owners of the business. When people say that M&A is an ‘art’ and a ‘science’, what does that mean? The science refers to the mechanical valuation methods (Comps, DCF, etc.), but the art is in making a judgment call on valuation based on the outputs of the various valuation methodologies. 2. Who can pay more when buying a company: a Financial buyer or Strategic buyer? Why? Strategic (i.e. corporate) buyers can typically pay more than Financial (i.e. Private Equity) buyers because strategic buyers typically have overlapping operations that can be removed post-merger to generate cost savings (i.e. Synergies). 3. When are sponsors and corporate buyers on equal footing? When a Financial buyer already owns a competing asset, they can generate synergies (which justifies a higher price) and thus are on mor...
Read more

Getting into Investment Banking: A Comprehensive Guide

-
Image
Introduction Breaking into investment banking (IB) is no small feat, whether you're pre-MBA or post-MBA, from a target or non-target school. While high GPAs and test scores are standard, they are often not enough to stand out. Here’s a strategic approach to help you embark on a successful investment banking career. 1. Network Extensively When your application lands at an investment bank, it’s usually reviewed by a small team of bankers responsible for recruiting from specific schools. Given the competitive nature of this field, networking is crucial. Why Networking Matters: Decision-making bankers are more likely to advocate for you if they know you. Especially vital for non-target school students. Engage with alumni and other connections at your target firms. How to Network: Start reaching out to analysts and associates a few months before core recruiting starts. Look for non-target alumni if you're from a non-target school; they often help each other out. Demonstrate Interest...
Read more