Let's have a look at an example of a circular reference in a workbook and we'll see the problems that it can cause. And we'll also experiment with a few ways of trying to correct it. If you open up the workbook, circularity work out empty, it will warn you when you open it that there are one or more circular references in that file, and it defines what that means. A formula refers to its own cell directly or indirectly, and there's a further warning this might cause incorrect calculation. You go, okay, it draws some blue arrows. These blue arrows are simply highlighting which cells are linked to each other in this circular reference. It also warns you down here in the gray area, circular references and one of the cell references involved. Let's have a look at what's happening in this file. We have some project income, 500 a year. We have capital expenditure a year of 1000 until year two. We have interest of 10%. In the cashflow section here, I've got my 1000 of capital expenditure. I've also got interest on this line that gives me a funding gap, including interest. How much do I need to borrow and the debt drawdown covers the CapEx and the interest. Here's my debt cork screw, I start with zero. I draw down 1000. I don't make any repayments. 1000 by the end of the year. The interest is calculated at 10% of the debt. 10% of 1000 is 100. That number then feeds back into here in line 17, and you can see something has gone wrong. I can see that 1000 times 10% equals 100, but that 100 should be appearing in this line here the formula very simply says minus D31, D31 is 100, but this line is showing zero, and it does the same the next year and the next and the next. What we've got is a circular reference. We need to know the amount of interest on this line to be able to work out how much funding we need to raise, how much debt needs to be drawn, and the amount of debt that we draw determines how much the interest amount will be and that feeds back into this calculation. So we need to know the amount of debt to work out the interest, but we need to know the amount of the interest to work out how much debt to draw down. We're asking Excel to do two things simultaneously on one calculation needs the other and vice versa. That's a classic circular reference, and you can see the problems here that it is not accurately reflecting the true interest cost.