Financial Modeling
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Recall, a circ is when a cell needs itself to calculate itself. In general, the only reason for a circ is as follows:
- End balance of debt and cash needs itself to calculate itself
- Why? to calculate interest expense/income
- We need ending balance to calculate AVERAGE balance
- Avg balance because interest in the real world is calculated using average (both expense and income)
For the detailed explanation, go to our Circular Reference and Excel Iterations explanations on youtube or in your WST Self-Study login.
Now, there are other reasons, including 3-D data tables in which we use self-referencing cells as well as some warrants calculations for in-the-money logic with different tranches. But these are separate decisions that are not part of the "Core Model" which we define as the fully integrated projection model (IS/BS/CF/Debt).
Any additional questions or clarifications, just reply to this post. Read More