How Excel Calculates Formulas (Order of Operations Explained)

Have you ever entered a formula in Excel and gotten a completely unexpected result? You're not alone. Many beginners struggle with formulas that don't calculate the way they expected. The problem often isn't with Excel—it's with understanding how Excel evaluates formulas.

Just like in math class, Excel follows a specific order when calculating formulas. If you don't understand this order, your formulas might produce incorrect results, even if they look correct at first glance.

How Excel Evaluates a Formula

When you enter a formula in Excel, the program doesn't just read it from left to right like a sentence. Instead, Excel follows a precise calculation order, similar to the mathematical order of operations you learned in school (often remembered as PEMDAS or BODMAS).

Understanding this order is essential for writing formulas that work correctly and produce the results you expect.

The Order of Operations in Excel

Excel follows these rules in order, from highest to lowest priority:

1. Parentheses

Excel evaluates anything inside parentheses first. This is the most powerful way to control how your formula calculates. If you have nested parentheses (parentheses inside parentheses), Excel works from the innermost set outward.

Example: =(2+3)*4 evaluates the addition inside parentheses before the multiplication.

2. Functions

After parentheses, Excel calculates any functions in your formula. Functions like SUM, AVERAGE, IF, and VLOOKUP are evaluated at this stage. If a function contains other functions (nested functions), Excel evaluates them from the innermost function outward.

Example: =SUM(A1:A5)*2 calculates the SUM function first, then multiplies the result by 2.

3. Multiplication and Division

These operations are evaluated next, working from left to right. If your formula has both multiplication and division, Excel processes them in the order they appear.

Example: =10/2*5 divides 10 by 2 (getting 5), then multiplies by 5 (getting 25).

4. Addition and Subtraction

These operations are evaluated last, also working from left to right. Like multiplication and division, if both appear in a formula, Excel processes them in order.

Example: =10-3+5 subtracts 3 from 10 (getting 7), then adds 5 (getting 12).

Simple Example Explained Step by Step

Let's look at a common formula that confuses beginners:

=2+3*4

You might think Excel would calculate this from left to right: add 2+3 to get 5, then multiply by 4 to get 20. But that's not how Excel works.

Here's what actually happens:

1. Excel sees multiplication (3*4) has higher priority than addition

• It calculates 3*4 = 12 first

• Then it adds 2+12 = 14

  The result is 14, not 20.

  This follows the same mathematical rules you learned in school—multiplication comes before addition.

  Using Parentheses to Control Calculations

  What if you actually want to add 2+3 first, then multiply by 4? This is where parentheses become your best friend.

  By adding parentheses, you tell Excel to calculate that part first:

  =(2+3)*4

Now Excel evaluates it differently:

1. Calculate what's inside parentheses: 2+3 = 5

• Multiply the result by 4: 5*4 = 20

  The result is 20.

  This simple change—adding parentheses—completely changes the outcome. When in doubt about calculation order, use parentheses to be explicit about what you want Excel to calculate first.

  How Excel Handles Nested Functions

  Functions follow the same principle. When you have functions inside other functions (nested functions), Excel evaluates them from the inside out.

  Here's a simple example with the IF function:

  =IF(SUM(A1:A3)>10, "High", "Low")

Excel evaluates this in this order:

1. First, calculate SUM(A1:A3) to get the total

• Compare that total to 10

• Return either "High" or "Low" based on the comparison

  The SUM function is evaluated first because it's nested inside the IF function. Excel always works from the innermost function outward.

  Common Mistakes Related to Calculation Order

  Forgetting Parentheses

  One of the most common mistakes is forgetting to use parentheses when you need them. This often happens with percentage calculations or when combining different operations.

  Incorrect: =A1+A2*0.1

If you want to add A1 and A2, then calculate 10% of the total, you need parentheses around the addition.

Assuming Left-to-Right Logic

Another common mistake is assuming Excel reads formulas from left to right like text. New users often write formulas thinking Excel will process them in the order written.

What you might think: =10+5*2 equals 30 (adding 10+5 first, then multiplying by 2) What Excel calculates: =10+52 equals 20 (multiplying 52 first, then adding 10)

Always remember that operator priority matters more than position in the formula.

Mixing Multiple Operations

When you have multiple operations at the same priority level, Excel processes them left to right. This can cause confusion:

=100/10/2

This calculates as: (100/10)/2 = 10/2 = 5, not 100/(10/2).

Tips to Avoid Calculation Errors in Excel

Use parentheses generously: When in doubt, add parentheses. They make your formulas clearer and ensure calculations happen in the order you intend. Extra parentheses won't hurt your formula—they'll only make it more reliable.

Test with simple numbers: Before applying a formula to your entire dataset, test it with simple, known values. This helps you verify that the formula calculates correctly.

Break complex formulas into steps: If you're building a complicated formula, create it in stages using separate cells. Once you confirm each step works correctly, you can combine them into a single formula.

Use the formula evaluation tool: Excel has a built-in tool (Formulas tab > Evaluate Formula) that shows you step-by-step how Excel calculates your formula. This is incredibly helpful for understanding and debugging complex formulas.

Add comments or documentation: For complex spreadsheets, add notes explaining what your formulas do. Your future self will thank you when you need to modify them later.

Conclusion

Understanding Excel's order of operations is fundamental to writing formulas that work correctly. Remember that Excel evaluates parentheses first, then functions, then multiplication and division, and finally addition and subtraction.

When you're unsure about how Excel will calculate a formula, use parentheses to make your intentions clear. With practice, thinking about calculation order will become second nature, and you'll write accurate formulas more quickly and confidently.