**Formulas and functions are both important tools when creating an Excel spreadsheet; while users type formulas right into the bar at the top of the spreadsheet, formulas come built within the application itself, so it actually comprises a special sort of formula.** While it is not possible to nest a formula in Excel, it is possible to do so with functions.

In Excel, formulas allow the user to carry out mathematical calculations ranging from simple addition or subtraction and ranging to far more complex operations. Entering a formula always begins with clicking on the cell where the result of the formula is to appear and then entering the equal sign (=) to indicate to the program that a formula is about to appear.

It is possible to enter numbers directly into the formula, but it is better to enter cell locations, so that if changes are necessary to those values, the formula still works. Using constant numbers means that it is necessary to revise the formula with each change.

Functions add flexibility to spreadsheets by bringing decision-making and other elements into the process. Functions test certain conditions within the spreadsheet to see if they are true. Depending on the answer, other calculations take place. For example, a function could test sales price levels for certain merchandise items. If shipping is based on the price of items, the subsequent calculation could apply shipping fees to a bill after the customer has placed the order.