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Definition of Quick Ratio

The term “Quick Ratio” refers to the liquidity ratio that assesses the ability of a company to cover its short-term liabilities by utilizing all those assets that can be easily converted into cash. The name “quick ratio” comes from the underlying idea that the ratio considers only those assets that can be quickly liquidated. The ratio is also known as the name acid test ratio.

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If a company’s quick ratio is greater than 1, it means that it has more than enough liquid assets that can be used to repay the current liabilities immediately. On the other hand, if it is less than 1, it indicates that the company’s liquidity is inadequate to pay off its current liabilities in case it is required to pay immediately.

Formula:

The formula for Quick Ratio can be derived by dividing the sum of cash, marketable securities, accounts receivables, and other current assets (other than inventories and prepaid expenses) by the total current liabilities. Mathematically, it is represented as,

Quick Ratio = (Cash + Marketable Securities + Accounts Receivable + Other Current Assets) / Total Current Liabilities

One can also derive the formula for Quick Ratio by subtracting inventories and prepaid expenses from the total current assets and then dividing the resulting figure by the total current liabilities. Mathematically, this is represented as:

Quick Ratio = (Total Current Assets – Inventories – Prepaid Expenses) / Total Current Liabilities.

Examples of Quick Ratio (With Excel Template)

Let’s take an example to understand the calculation of the Quick Ratio formula in a better manner.

You can download this Quick Ratio Excel Template here – Quick Ratio Excel Template

Example – #1

Let us take the example of a company that has applied for a bank loan in order to remodel its storefront. The company has provided the following balance sheet information to the bank:

Based on the given information, Calculate the quick ratio of the company.

Solution:

Of the above-mentioned current assets, only cash, marketable securities, and accounts receivable can be considered quick assets.

Calculate Quick Ratio using the formula given below:

QR = ($15,000 + $20,000 + $10,000) / $35,000

QR = 1.29

Therefore, the quick ratio for the company stood at 1.29, which indicates a fairly comfortable liquidity position.

Example – #2

Let us take the latest annual report of Apple Inc. to explain the quick ratio calculation. As per the annual report for the year ended on Sep 29, 2023, the following information is available:

Based on the given information, Calculate the quick ratio for Apple Inc. for the year ending Sep 29, 2023.

Solution:

Out of the above-mentioned current assets, only cash and cash equivalents, marketable securities, net accounts receivable, vendor non-trade receivables, and other current assets can be considered quick assets.

Quick Ratio = (Cash and Cash Equivalents + Marketable Securities + Accounts Receivable + Net Accounts Receivable + Vendor Non-Trade Receivables + Other Current Assets) / Total Current Liabilities

QR = ($25,913 Mn + $40,388 Mn + $23,186 Mn + $25,809 Mn + $12,087 Mn) / $116,866 Mn

QR = 1.09

Therefore, the QR for Apple Inc. for the year ending Sep 29, 2023, stood at 1.09, indicating a moderate liquidity position.

Source:d18rn0p25nwr6d.cloudfront.net

Advantages

It assesses the ability to repay current liabilities based on the assets a company can quickly convert to cash. As such, it is a relatively more conservative liquidity ratio.

Its calculation omits inventories because converting inventories into cash could take too long. Elimination of inventories from its calculation helps management and other stakeholders to have a precise idea about the liquidity position of the concerned company.

This ratio is one of the easiest ratios to understand, and as such, it can be very helpful for people who do not have a deep understanding of accounting and finance.

It doesn’t provide any information about the timing of cash flows which can be a defining factor in the assessment of the liquidity position of a company.

Some of the assumptions of the QR are not realistic. For instance, it assumes that accounts receivable is readily available for collection, which is not always true.

It does not consider the situation that may arise in times of crisis. During the crisis, even the most easily saleable securities may find it difficult to trade in the market.

Conclusion

So, it can be seen that the quick ratio is a moderate conservative liquidity measure which is more conservative than the current ratio but less conservative than the cash ratio. This ratio helps the creditors in the assessment of the liquidity position of a company more accurately.

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Calculator (Examples With Excel Template)

Normalization Formula (Table of Contents)

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What is Normalization Formula?

In statistics, there are many tools to analyze the data in detail and one of the most commonly used formula or method is the Normalization method. Normalization and standardization have been used interchangeably but they have usually different interpretations and different meanings altogether. Normalization in layman terms means normalizing of the data. Normalization refers to a scaling of the data in numeric variables in the range of 0 to 1.

The formula for Normalization is

X new = (X – X min) / (X max – X min)

Where

X: It is a set of the observed values present in X.

X min: It is the minimum values in X

X max: It is the maximum values in X

Examples of Normalization Formula (With Excel Template)

You can download this Normalization Formula Excel Template here – Normalization Formula Excel Template

Normalization Formula – Example #1

Maximum Value in the data set is calculated as

So 75 is the maximum value in the given data set.

Minimum Value in the data set is calculated as

20 is the minimum value in the given data set.

Normalization is calculated using the formula given below

X new = (X – X min) / (X max – X min)

Similarly, we calculated the normalization for all data value.

Normalization Formula – Example #2

Calculate Normalization for the following data set.

Maximum Value in the data set is calculated as

So 164 is the maximum value in the given data set.

Minimum Value in the data set is calculated as

101 is the minimum value in the given data set.

Normalization is calculated using the formula given below

X new = (X – X min) / (X max – X min)

Similarly, we calculated the normalization for all data value.

Normalization Formula – Example #3

Calculate Normalization for the following data set.

Maximum Value in the data set is calculated as

So 197 is the maximum value in the given data set.

Minimum Value in the data set is calculated as

121 is the minimum value in the given data set.

Normalization is calculated using the formula given below

X new = (X – X min) / (X max – X min)

Similarly, we calculated the normalization for all data value.

Explanation

The normalization formula can be explained in the following below steps: –

Step 1: From the data the user needs to find the Maximum and the minimum value in order to determine the outliners of the data set.

Step 2: Then the user needs to find the difference between the maximum and the minimum value in the data set.

Step 3: Value – Min needs to be determined against each and every data point in the set.

Step 4: After determining all the values in the data set the value needs to be put in the formula i.e. X new = (X – X min) / (X max – X min)

Relevance and Uses of Normalization Formula

Normalization is widely used in data mining techniques and data processing techniques. It is usually known as featured scaling under which you try to bring data in a normalized or a standardized form to do analysis on it and draw various interpretations.

This formula is also used in prediction modeling and forecasting which makes the model more relevant and user-friendly.

This formula and technique is also used in the marking scheme of various entrance examinations where in order to ensure that the candidate is neither benefited nor deprived by the level of difficulty in the examination, as a result, the candidate who has attempted simple or easier questions can get more marks in the test in comparison with the candidates who attempt difficult questions in the thought of getting more marks.

Normalization also has its own limitations in the sense if the data set has more outliers then normalization of the data set becomes are tedious and a difficult task to be done to the data.

Normalization Formula Calculator

You can use the following Normalization Calculator

X Xminimum Xmaximum Xnew   Xnew = X − Xminimum = Xmaximum-Xminimum

0

0

= 0

0

0

Recommended Articles

This has been a guide to Normalization Formula. Here we discuss how to calculate Normalization along with practical examples. We also provide a Normalization calculator with downloadable excel template. You may also look at the following articles to learn more –

Calculator (Example And Excel Template)

Statistics Formula (Table of Contents)

What is the Statistics Formula?

The term “Statistics” refers to the branch of mathematics that deals with the analysis of numbers and data. Statistics formula refers to the collection of measures of dispersion or central tendency that helps in understanding and interpreting a certain set of data.

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Formulas

Mean  x̄ = Σxi / N

[ Nth / 2 term + ( N / 2 + 1)th term ] / 2  ; when N is even

Mode = The value in the data set that occurs most frequently

Variance =  Σ(xi – x̄)2 / N

Where

xi: ith Term in The Data Set

N: Number of Variables in The Data Set

Example of Statistics Formula (With Excel Template)

You can download this Statistics Formula Excel Template here – Statistics Formula Excel Template

Statistics Formula – Example #1

Let us take the example of a data set with an odd number of variables to illustrate the statistics formula: 21, 27, 34, 39, 22, 45, 19, 27, 29, 43, 36, 24, 27, 31, 25, 45, 21, 38, 30. The number of variables, N = 19. Calculate the mean, median, mode and variance of the above data set.

Solution:

Mean is calculated using the formula given below

Mean  x̄ = Σxi / N

Mean = (21 + 27 + 34 + 39 + 22 + 45 + 19 + 27 + 29 + 43 + 36 + 24 + 27 + 31 + 25 + 45 + 21 + 38 + 30) / 19

Mean = 30.7

Median is calculated using the formula given below

(N+1)th / 2 term

Median = (19 + 1)/2 = 10th term

Median = 10th term, 19, 21, 21, 22, 24, 25, 27, 27, 27, 29, 30, 31, 34, 36, 38, 39, 43, 45, 45

Median = 29

Mode is calculated using the formula given below

Mode = The value in the data set that occurs most frequently

Mode = 19, 21, 21, 22, 24, 25, 27, 27, 27, 29, 30, 31, 34, 36, 38, 39, 43, 45, 45

Mode = 27

Variance is calculated using the formula given below

Variance =  Σ(xi – x̄)2 / N

Variance = {(21 – 30.7)2 + (27 – 30.7)2 + (34 – 30.7)2 + (39 – 30.7)2 + (22 – 30.7)2 + (45 – 30.7)2 + (19 – 30.7)2 + (27 – 30.7)2 + (29 – 30.7)2 + (43 – 30.7)2 + (36 – 30.7)2 + (24 – 30.7)2 + (27 – 30.7)2 + (31 – 30.7)2 + (25 – 30.7)2 + (45 – 30.7)2 + (21 – 30.7)2 + (38 – 30.7)2 + (30 – 30.7)2} / 19

Variance = 65.5

Therefore, the mean, median, mode and variance of the given data set are 30.7, 29, 27 and 65.5, respectively.

Statistics Formula – Example #2

Now, let us take the example of a data set with even number of variables and calculate the statistics formula: 82, 76, 62, 78, 83, 89, 61, 76, 72, 71, 91, 76, 62, 69, 77, 76, 85, 89, 71, 63, 68, 82. The number of variables, N = 22. Calculates the mean, median, mode and variance of the above data set.

Solution:

Mean is calculated using the formula given below

Mean  x̄ = Σxi / N

Mean = (82 + 76 + 62 + 78 + 83 + 89 + 61 + 76 + 72 + 71 + 91 + 76 + 62 + 69 + 77 + 76 + 85 + 89 + 71 + 63 + 68 + 82) / 22

Mean = 75.4

Median is calculated using the formula given below

Median = [ Nth / 2 term + ( N / 2 + 1)th term ] / 2

Median = (76 + 76) / 2

Median = 76

Mode is calculated using the formula given below

Mode = The value in the data set that occurs most frequently

Mode =  The Data Set is 76, which occurs the most (4 times) frequently in this data set.

Mode = 76

Variance is calculated using the formula given below

Variance =  Σ(xi – x̄)2 / N

Variance = {(82 – 75.4)2 + (76 – 75.4)2 + (62 – 75.4)2 + (78 – 75.4)2 + (83 – 75.4)2 + (89 – 75.4)2 + (61 – 75.4)2 + (76 – 75.4)2 + (72 – 75.4)2 + (71 – 75.4)2 + (91 – 75.4)2 + (76 – 75.4)2 + (62 – 75.4)2 + (69 – 75.4)2 + (77 – 75.4)2 + (76 – 75.4)2 + (85 – 75.4)2 + (89 – 75.4)2 + (71 – 75.4)2 + (63 – 75.4)2 + (68 – 75.4)2 + (82 – 75.4)2} / 22

Variance  = 78.5

Therefore, the mean, median, mode and variance of the given data set are 75.4, 76, 76 and 78.5, respectively.

Explanation

The formula for Statistics can be calculated by using the following steps:

Mean: It is the average of all the numbers available in the data set.

Median: If arranged in ascending or descending order, it is exactly the midpoint of the data set. For instance, if there are 100 numbers in a data set, then 50th and 51st terms are the median numbers.

Mode: It is that number in a data set that appears the maximum number of times.

Variance: It measures how dispersed are the numbers in a data set, i.e. how far spread out are each number from the mean of the data set.

Relevance and Use of Statistics Formula

From the vantage point of a statistician, it is very important to understand the statistics formula concept as it helps organise and analyse large volumes of data. These statistical techniques are also used in various decision-making tools, especially drawing conclusions from data collected through surveys.

Statistics Formula Calculator

You can use the Statistics Formula Calculator

xi N Statistics Formula   Statistics Formula = Σxi / N Σ

0

/

0

= 0

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This is a guide to the Statistics Formula. Here we discuss how to calculate the Statistics along with practical examples. We also provide a Statistics calculator with a downloadable excel template. You may also look at the following articles to learn more –

How To Use Object In Excel Vba With Examples?

VBA Object

In Microsoft Excel, a VBA Object can contain one or more than one object. Such as a single workbook can have one or more than one worksheet. Workbook, Worksheet, Range, and cells are the objects in Excel. Each object has its own properties. And they all have a different method of application. Let say the workbook is the main object which has 2 worksheets in it. Those 2 worksheets will be its child object. One of the sheets has one range, so that sheet will become the main object, and the range will be its child object.

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How to Use Object in VBA

Let’s see the examples of object in Excel VBA.

You can download this VBA Object Excel Template here – VBA Object Excel Template

Example #1 – VBA Object

It can be written in many ways. Suppose we need to print any text in a cell, so this can be done in various ways. We can directly use the range value to that cell. This direct method is not a part of VBA Object but a process of performing a task that could be done by VBA Object as well. For this:

Step 1: Go to VBA and insert a Module from the Insert menu option as shown below.

Step 2: Now write the Sub Category of performed function, like VBA Object, in any other name as per your choice, as shown below.

Sub

VBAObject2()

End Sub

Step 3: Now select the range function considering any cell, let’s say cell B3 with Value as shown below.

Code:

Sub

VBAObject2() Range("B3").Value =

End Sub

Step 4: Now add text or word in that range cell as shown below.

Code:

Sub

VBAObject2() Range("B3").Value = "VBA Object"

End Sub

Step 5: Now, compile the code and run it by pressing the play button located below the menu bar.

Example #2 – VBA Object

This is the normal way of printing text to any cell. How we will see how the same process can be done when we use VBA Object. For this, we will need another fresh module. And in that,

Step 1: Go to VBA and insert a Module from the Insert menu option as shown below.

Step 2: Write the Sub Category of VBA Object as shown below.

Code:

Sub

VBAObject1()

End Sub

Step 3: Here, we will see the complete VBA Object from the main to a child category. First, select the currently opened workbook with the help of the command ThisWorkBook with Application, as shown below. This will select the workbook which is actually opened and last selected.

Code:

Sub

VBAObject1() Application.ThisWorkbook

End Sub

Step 4: Now select the sheet which is currently opened in the workbook, or we can write the name of the worksheet as well. Here, we have written the name of sheet Sheet1 in inverted commas, as shown below.

Code:

Sub

VBAObject1() Application.ThisWorkbook.Sheets ("Sheet1")

End Sub

Step 5: Now comes the range. Select the range of the cell where we need to print or insert the text. Here we are selecting cell B4, as shown below.

Code:

Sub

VBAObject1() Application.ThisWorkbook.Sheets("Sheet1").Range("B4").Value

End Sub

Code:

Sub

VBAObject1() Application.ThisWorkbook.Sheets("Sheet1").Range("B4").Value = "VBA Object"

End Sub

Step 7: Now, compile and run the code. We will see cell B4 has the text “VBA Object”.

This complete process is called VBA Object. In which we have first selected the main object, i.e. Workbook, which has its child object, i.e. Sheet1, and that has another child object range, i.e. cell B4.

Example #3 – VBA Object

There are many different ways to add text to any cell. One can be with Excel VBA Object, and others can be without it. In these categories, again, there are many ways to do it. Let’s see another way to add VBA Object. For this, we will need a module.

Step 1: In that module, add a subcategory; better make it with sequence number as shown below.

Code:

Sub

VBAObject3()

End Sub

Step 2: Select the worksheet by adding the name of the current worksheet, which is Sheet1, as shown below.

Code:

Sub

VBAObject3() Worksheets("Sheet1").

End Sub

Step 3: Now, add the range of the cell where we want to see the output, as shown below.

Code:

Sub

VBAObject3() Worksheets("Sheet1").Range("A3").Value

End Sub

Step 4: At last, give it a value that we can see once we run the code. We are considering the same text as seen in example 1.

Sub

VBAObject3() Worksheets("Sheet1").Range("A3").Value = "VBA Object"

End Sub

Step 5: Now run the code. We will see; cell A3 got the text which we wanted to add there, as shown below.

In this process, we have directly added the worksheet. So Worksheet will become our Object, and Range will become its child object.

Step 6: There is another way to perform the same task. In the bracket of the worksheet, instead of writing the sheet name, we can write the sequence of the sheet, which is 1, as shown below.

Code:

Sub

VBAObject3()

'

Worksheets("Sheet1").Range("A3").Value = "VBA Object"

Worksheets(1).Range("B3").Value = "VBA Object"

End Sub

Step 7: Now run the modified code. We will see cell B3 got the same text VBA Object as cell A3, as shown below.

By keeping both the code in line, we can see and compare the changes we made. In another way,

Step 8: Instead of the Worksheet function, if we use the Sheet with sequence and selecting cell C3 as range as shown below.

Code:

Sub

VBAObject3()

'Worksheets("Sheet1").Range("A3").Value = "VBA Object"

'Worksheets(1).Range("B3").Value = "VBA Object"

Sheet1.Range("C3").Value = "VBA Object"

End Sub

Step 9: Now run this code. We will see, again the same text will get added in range cell C3.

In all the methods which we have seen in this example, Worksheet is our object, and the range of the cell is child object or Sub-object.

Pros and Cons of  Excel VBA Object

We can make as many objects and link them together to sink them.

It makes use of Workbook, Sheet, and Range easy.

This allows a user to make changes in a specific Workbook, Worksheet or Range.

The same process can be performed by a much shorter code with having the same result.

Things to Remember

Worksheet and Sheet both have the same use.

We can select any worksheet of the same workbook of any number sequence.

While writing big lines of code, it is important to form an Object in which the Workbook, Worksheets, and Ranges of different cells are linked.

Must save the file in Macro-Enabled Excel format. It allows us to use the code and change the code whenever required.

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This is a guide to VBA Object. Here we discuss how to use Object in Excel VBA along with practical examples and downloadable excel template. You can also go through our other suggested articles –

Histogram In Excel (Types, Examples)

Histogram in Excel

Histogram Chart in Excel is a data analysis tool used to show the periodic rise and drop in the data with the help of vertical columns. We can find the Histogram chart option if we use Excel 2024. Still, for the older version of MS Excel, such as 2013 and 2010, we need to find this option in the Data Analysis option, which is available under the Data Analysis option.

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Uses of Histogram Chart in Excel

A histogram is a graphical representation of the distribution of numerical data. A histogram is a column chart that shows the frequency of data in a certain range in a simpler way. It provides the visualization of numerical data by using the number of data points that fall within a specified range of values (also called “bins”).

A histogram chart in Excel is classified or made up of 5 parts:

Title: The title describes the information about the histogram.

X-axis: The X-axis is the grouped interval that shows the scale of values in which the measurements lie.

Y-axis: The Y-axis is the scale showing the times the values occurred within the intervals corresponding to the X-axis.

The bars: This parameter has a height and width. The height of the bar shows the number of times the values occurred within the interval. The width of the bars shows the interval or distance, or covered area.

Legend: This provides additional information about measurements.

Why is the histogram chart important in Excel?

There are many benefits to using a Histogram chart in Excel.

The histogram chart shows the visual representation of data distribution.

A histogram chart displays a large amount of data and the occurrence of data values.

Easy to determine the median and data distribution.

Types/Shapes of Histogram Chart

It depends on the distribution of data; the histogram can be of the following type:

Normal Distribution

A Bimodal Distribution

A Right Skewed Distribution

A Left Skewed Distribution

A Random Distribution

Now we will explain the shapes of the Histogram chart in Excel.

Normal Distribution:

A Bimodal Distribution:

There are two peaks. This is also called Double peaked distribution in this dist. Under this distribution in one data set, the results of two processes with different distributions are combined. The data is separated and analyzed like a normal distribution. This looks like the below image:

A Right Skewed Distribution:

In this distribution, a large number of data values occur on the left side and a fewer number of data values on the right side. This is also called a positively skewed distribution. This distribution occurs when the data has a range boundary on the left-hand side of the histogram. For example, a boundary of 0. This dist. It looks like the below image:

A Left Skewed Distribution:

This is also called a negatively skewed distribution. In this distribution, a large number of data values occur on the right side and a fewer number of data values on the left side. This distribution occurs when the data has a range boundary on the right-hand side of the histogram. For example, a boundary such as 100. This dist. It looks like the below image:

A Random Distribution:

This is also called a multimodal distribution. In this dist., several processes with normal distributions are combined. This has several peaks; thus, the data should be separated and analyzed separately. This dist. It looks like the below image:

Where is the Histogram Chart found in Excel?

The histogram chart option is found under Analysis ToolPak. The Analysis ToolPak is a Microsoft Excel data analysis add-in. This add-in is not loaded automatically on Excel. Before using this, we need to load it first.

Steps to load the Analysis ToolPak add-in:

This will open the below Add-Ins dialog box.

This will open an Add-Ins dialog box.

The Analysis ToolPak is loaded in excel now and will be available under the DATA tab with the name Data Analysis.

How to Create a Histogram Chart in Excel?

Before creating a histogram chart in Excel, we must create the bins in a separate column.

Bins represent the intervals into which we want to group the data set. These intervals should be consecutive, non-overlapping, and of equal size.

There are two ways to create a histogram chart in Excel:

If you are working on Excel 2024, there is a built-in histogram chart option.

If you are working on Excel 2013, 2010, or earlier versions, you can create a histogram using Data Analysis ToolPak.

Creating a Histogram chart in Excel 2024:

Excel 2024 adds a histogram chart option as an inbuilt chart under the chart section.

Select the entire dataset.

The histogram chart would appear based on your dataset.

Creating a Histogram chart in Excel 2013, 2010, or earlier version:

Download the Data Analysis ToolPak as shown in the above steps. You also can activate this ToolPak in Excel 2024 version too.

Examples of Histogram Chart in Excel

You can download this Histogram Chart Excel Template here – Histogram Chart Excel Template

Example #1

Let’s create a dataset of scores (out of 100) of 30 students as shown below:

For creating a histogram, we need to create the intervals at which we want to find the frequency. These intervals are called bins. 

Below are the bins or score intervals for the above data set.

Please follow the below steps to create the Histogram chart in Excel: 

A Histogram dialog box will open.

In the Histogram dialog box, we will enter the following details:

Select the Input Range (as per our example – with the scores column B)

Select the Bin Range ( Intervals column D)

This would create a Frequency Distribution table and the Histogram chart in the specified cell address.

There are below points that need to keep in mind while creating Bin’s or Intervals:

The First bin includes all the values below it. For bin 30, frequency 5 includes all the scores below 30.

The last bin is 90. This bin includes any data values which are higher than the last bin. In our example, 3 values are higher than the last bin, 90. If the values are higher than the last bin, Excel automatically creates another bin – More.

This chart is called a static histogram chart. If you want to change the source data, you must create the histogram again.

You can do the formatting of this chart like other charts.

Example #2

Let’s take another example with 15 data points which are the salary of a company.

Now we will create the bins for the above dataset.

For creating the histogram chart in Excel, we will follow the same steps as in example 1.

It will open a histogram dialog box.

Select the Input Range with the Salary data points.

Select the Bin Range with the bins column.

The below chart will appear as follows:

Explanation:

The First bin, $25,000, will include all data points less than this value.

The last bin, More, will include all the data points over $65,000. It’s created automatically by Excel.

Pros

The histogram is very useful while working with a large amount of data.

A histogram chart shows the data in a graphical form that is easy to compare and understand.

Cons

Histogram chart is very difficult to extract the data from the input field in the histogram. It means difficult to point out the exact number.

While working with histograms, it creates a problem with multiple categories.

Things to Remember About Histogram Charts in Excel

A histogram chart uses for continuous data and determines the range of data with the bin.

The bins are usually determined as consecutive and non-overlapping intervals.

The bins must be adjacent and are of equal size (but are not required to be).

If you are working with Excel 2013, 2010, or earlier versions, you must activate the Excel Add-Ins for Data Analysis ToolPak.

Recommended Articles

This has been a guide to histograms in Excel. Here we discuss its types and how to create a Histogram chart in Excel, along with Excel examples and a downloadable Excel template. You may also look at these useful charts in Excel –

Xirr In Excel (Formula, Examples)

XIRR Function in Excel

XIRR function is also one of the financial functions in Excel, which is used to calculate the Internal Rate of Return (IRR) in any series of intervals. XIRR function works when we assign the dates of obtained intervals, whether regular or irregular and calculates the internal rate of return on that array of cash flow. The good thing about XIRR Function is it considers only irregular series of cash flow or installment intervals. In contrast, most of the functions in Excel give fine results when a regular interval series is selected.

Returns:

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XIRR Formula in Excel

Below is the XIRR Formula.

How to Open XIRR Function?

We Get A New Function Windows Showing In Below Mention Picture.

Then we have to enter the details of cash value and dates.

The shortcut of using the XIRR Formula

Values (Required Argument) –The values representing the series of cash flows. Instead of an array, it can reference a range of cells containing values.

Dates (Required Argument) – A series of dates corresponding to the given values. Subsequent dates should be later than the first date as the first date is the start date, and subsequent dates are future dates of outgoing payments or income.

Guess (Optional Argument) –It is an initial guess of the IRR. If omitted, Excel takes the default value, which is 10%.

The format of the result

It is the internal interest rate, so we consider it in the percent (%) number format.

How to use the XIRR Function in Excel?

This XIRR function is very simple and easy to use. Let us now see how to use XIRR in Excel with the help of some examples.

You can download this XIRR function Excel Template here – XIRR function Excel Template

Example #1

Calculating XIRR value using XIRR Formula  =XIRR(H3: H9, G3: G9)

The answer will be 4.89%

In the above table, the interest inflows are irregular. Hence, you can use the XIRR function in Excel to compute

The internal rate of interest on these cash flows, the investment amount is showing a minus sign. When you get the result, then change the format with %.

Example #2

Calculating XIRR value using XIRR Formula  =XIRR(A3: A15, B3: B15)

The answer will be 16.60%

In an Excel sheet, first, enter the original amount invested. A ‘minus sign should represent the amount invested. In the following cells, enter the returns received during each period. “Remember to include the ‘minus’ sign whenever you invest the money.

Now, find XIRR using the values that refer to a series of cash flows corresponding to a schedule of payments in dates. The series of values must contain at least one positive and one negative value. The first payment refers to the investment made at the beginning of the investment period and must be a negative value. All succeeding payments are discounted based on a 365-day-year.

The date is when the first investment and the returns were received. Each date should correspond to its respective investment made or income received, as shown in the above table. Dates should be entered in a ‘DD-MM-YY (date-month-year)’ format, as errors can occur if the format is not followed. If any number in the dates is invalid, or the format of dates is inconsistent, XIRR will reflect the “#value!” Error.

If we discuss error problems, this is also an important part. If our data is not correct, we will face such a type of issue as below mention.

#Num! Occurs if either:

The supplied values and date arrays have different lengths.

The supplied values array does not contain at least one negative and at least one positive value;

Any of the supplied dates proceeds to the first supplied date.

The calculation needs to converge after 100 iterations.

#value! : – occurs if any supplied dates need to be recognized as valid Excel dates.

If you attempt to input dates in text format, there is a risk that Excel may misinterpret them, depending on the date system or data interpretation settings on your computer.

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