Consider the data used in spreadsheet below.
Here the blue line indicates circular referencing. As a result, our cells which were supposed to show some values as per the formulas (depicted below), are valued zero. That is the problem that comes with circular referencing.
Now how do we set this situation right?
Microsoft has given excel and a feature within excel on how to remove circular referencing.
1. Go to Excel options in the start button of ‘Excel’
2. Go to ‘Formulas’ section within Excel Options
3. Tick on ‘Enable Iterative calculation
4. Press ‘OK’
As a result, our data sheet will be modified as below.
And that is another Financial Modeling lesson concluded!