Formula field boundaries versus record-updating automation
Key Takeaway
Formula fields calculate a read-only value when the record is displayed. Record-updating automation writes an actual value into a field when the record is saved.
A formula field gives you a live, read-only calculation that no one can edit. Record-updating automation, such as a before-save record-triggered flow or a field update action, gives you an actual field value set at save time. Picking the right one depends on which of these a requirement needs, and on knowing when a requirement goes past what either can do.
What a formula field is
A formula field is a custom field that calculates its value from other fields, merge fields, or expressions. Users can view it on record detail pages, but they can't see the formula behind it or edit the value.
Formula fields can reference fields on records related through a lookup or master-detail relationship, so a formula on a child record can display values from its parent.