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You can lay out data in a tabular format in Word and do things like sort it and even do some calculations. Using Word you can create data in a format that could later be used in a database application, such as comma separated text. When doing a mail merge, you can create your data with Word rather than sourcing it externally, and it will be stored in a file with fields to be used in you mail merge. So Word does have some limited databasing capabilities, but you would not use it to make a proper database as it does not have all the facilities to do so.

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Q: Can you create a database in Microsoft Word 2007?
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