Are these the exact numbers?

Question

So circular reference just tries to fit the calculation with precise numbers in cases such missing values. These numbers calculated ain't the exact ones it's like precise prediction. Do I understand correctly?

Answer 1

Hi Sayed!

Thanks for reaching out.

Please accept my apologies for the delayed response.

As you can see in minute 1:45 from the video, the value of the Ending PP&E has changed. This is because we've used it to calculate D&A, thus arriving at a correct estimation of the Ending PP&E.

In a way, you can think of the fact that Excel prompts us that we are about to use a circular reference as a warning that if we use it inadvertently, we may mess our calculations and, say, break the linear relationship between the calculations (addition, subtraction etc.). If it is a conscious decision to use circular references, we avoid the need of recreating a table where we replicate all values with a new D&A (.. and then - a new PP&E, which is the one you see in the video after 1:45).

Hope this helps.
Best,
Martin

Are these the exact numbers?

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