TREND Function – Forecast & Extrapolate in Excel
The TREND function is an Excel Statistical functionFunctionsList of the most important Excel functions for financial analysts. This cheat sheet covers 100s of functions that are critical to know as an Excel analyst that will calculate the linear trend line to the arrays of known y and known x. The function extends a linear trend line to calculate the additional y-values for a new set of x-values. This guide will show you step-by-step how to extrapolate in Excel using this function.
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As a financial analystFinancial Analyst Job DescriptionThe financial analyst job description below gives a typical example of all the skills, education, and experience required to be hired for an analyst job at a bank, institution, or corporation. Perform financial forecasting, reporting, and operational metrics tracking, analyze financial data, create financial models, the function can help us in predicting future trends. For example, we can use trends to predict the future revenue of a particular company. It is a great forecasting function
The TREND function uses the following arguments:
Known_y’s (required argument) – This is the set of y-values we already know in the relationship y = mx + b.Known_x’s (optional argument) – This is a set of x-values. If we provide the argument, it should be of the same length as the set of known_y’s. If omitted, the set of
Const (optional argument) – This specifies whether to force the constant b to equal 0. If const is TRUE or omitted, b is calculated normally. If false, b is set equal to 0 (zero) and the m-values are adjusted so that y = mx.
The TREND function uses the least squares method to find the line of best fit and then uses IT to calculate the new y-values for the provided new x-values.
How to use the TREND Function in Excel?
To understand the uses of the TREND function, let’s consider an example. Below, we will extrapolate in Excel using the forecast function.
Example – Forecast and Extrapolate in Excel
Suppose we wish to build a forecast or extrapolate the future revenue of a company. The data set given is shown below:
To calculate future sales, we will use the TREND function. The formula to use will be:
This will return an array of values for y, as the x values to be calculated for are an array of x’s. So, it must be entered as an array formula, by highlighting the cells which need to be filled,input your function into the first cell of the range, and press CTRL-SHIFT-Enter (Same for Mac). We get the result below:
Things to remember about the TREND Function
#REF! error – Occurs if the known_x’s array and the new_x’s array are of different lengths.#VALUE! error – Occurs when either:Non-numeric values provided in the known_y’s,
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Thanks for reading CFI’s guide to the Excel TREND function. By taking the time to learn and master these functions, you’ll significantly speed up your financial modeling in ExcelWhat is Financial ModelingFinancial modeling is performed in Excel to forecast a company”s financial performance. Overview of what is financial modeling, how & why to build a model.. To learn more, check out these additional CFI resources: