# How to Calculate Averages in Excel

Averages in Excel, in particular the AVERAGE formula, are a must learn for aspiring business analysts.  This is a simple concept to get to grips with as shown in this guide…

Average Formula Excel 2010

The Average formula, or Average function, in Excel takes the format:

=AVERAGE(number1, number2, number3…)

This is where “number1, 2, 3” etc. represent the range of cells that you want to calculate an average on.

Take the below example to see how this works in Excel:

The Average is calculated by taking the sum of all the values, in this case the sum of the sales, and dividing that total by the number of observations, in this case business areas.  Therefore in the example shown above the AVERAGE formula is calculating 1000/4 = 250.  This interprets as “the average sales per business area is 250”.

Averages in general

The concept of an average and the AVERAGE formula used in Excel is a simple one but it can be very effective in the business environment.

Business Analysts will often be confronted with huge datasets that have multiple ways of grouping and reporting the data within and it can sometimes seems a bit overwhelming, especially if your boss is asking you what those 250,000 lines of data mean!

The use of averages will help you to provide your boss with a basic story behind the data and then decisions can be taken whether it is of value to start a more thorough analysis.

Keep Excelling,