WHAT IS CIRCULAR REFERENCE IN EXCEL and HOW TO RESOLVE CIRCULLAR REFERENCES

Circular references in Excel are akin to a snake eating its own tail. A formula in a cell (cell x) refers to another cell, which in turn possibly refers to the first cell or to another cell (cell y) which in turn, directly or indirectly, refers to 1st cell (cell x).

Early Excel users will be told that Circular References are not good. Well, that’s a debatable point. However, early Excel users may be better advised to side step this problem. However, expert users of Excel do use Circular References to directly solve a problem situation.

First Illustration

Assume that your company Board takes a decision to pay employees a bonus of 10% on Profits after Taxes. The expected Profit before taxes for the coming year before Employee bonus is Rs.10 crores. Income Tax rate is 30%. What will be the amount of bonus that will be paid to employees?

Illustration 2

Assume that in a company there are two product lines (Prod. X and Prod Y) and two functional support functions (Accounting and HR). The estimated usage of the Accounting Department by other departments is

Prod. X 50%Prod. Y 30%HR Dept. 20%

The estimated usage of the HR Department by other departments is

Prod. X 55%Prod. Y 30%Finance Dept. 15%

For the coming year, the expenses to be incurred by the two departments are –

Accounting Rs.600,000HR Rs.900,000

Find out how much of the total amount of Rs.1,500,000 will be absorbed by the two Product Departments?