Calculating Poisson Distribution in Excel is one of the many handy statistical functions that we can run with a simple formula. Poisson Distribution is a measure that we can use to predict the probability of something occurring when provided with the number of times it occurs over a period.
Excel makes this super easy using a built in function called POISSON.DIST – which allows us to easily input the required arguments and outputs a single value.
In this simple guide, we are going to run through how to calculate poisson distribution in Excel using the POISSON.DIST function. We will cover:
- The POISSON.DIST formula and syntax
- An example of calculating Poisson Distribution in Excel
Let’s get started.
The POISSON.DIST formula
The formula itself for poisson distribution is a relatively simple one. It is as follows:
Let’s break this down:
x: The number of events – required value
mean: The expected number of events – required value
cumulative: TRUE or FALSE – TRUE returns the cumulative probability, while FALSE returns the exact probability
While the x and mean are simple enough, when we look at an example we will display the output of using both the TRUE and FALSE values.
Now that we have the formula explained, let’s look at some example outputs.
Example of calculating Poisson Distribution in Excel
In our sample data set, we have the number of events set to 15, with our mean at 10. For the purposes of a real life example, let’s say we are looking for number of products sold. We are averaging 10 a day, and looking to see what the chances of selling 15 are.
Using the POISSON.DIST formula with both cumulative options, we are presented with the below output:
As we can see, these numbers vary greatly. The reason for this is that cumulative probability is determining how likely it is that we will sell between 0 and 15 products based on averaging 10, which logically is pretty likely! Selling exactly 15 on the other hand when we average 10 is far less likely, hence the much much much lower value that we are given.
Having the cumulative vs exact measure can be really handy when forecasting things such as sales, as it helps us determine the overall probability of our higher goals.
One callout with our values, and in a way it does go without saying given the measures, but we cannot use negative numbers. If we entered -5 for example in either of the cells then we are left with a #NUM! error.
This sums up our simple guide on how to calculate Poisson Distribution in Excel using the POISSON.DIST function. It is quite a simple but powerful calculation that can quickly and easily be used in a variety of forecasts. For more handy guides on working with Excel, be sure to check out our Excel Tips page.