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Circularity in Spreadsheets - Things to Consider

Mar 9, 2008
Chains of reasoning or calculations arise where one statement depends on another, which in turn depends on another. In evaluating a circular chain of reasoning, the calculations are form a circle.

In some cases circularity generates an error. In others, circularity in spreadsheets is used intentionally to solve critical issues. Although it may be easy to get answers from a spreadsheet, it may be difficult to get the right answers when circularity in spreadsheets is involved.

When you deal with spreadsheets like Microsoft Excel, circularities or circular references may lead to significant problems. Circularities in spreadsheets occur when one code requires information from another code, which requires the information from the first code. Patrick Burns, in his article on "Spreadsheet Addiction" (http://www.burns-stat.com/pages/Tutor/spreadsheet_addiction.html) says that the spreadsheets that are available today, including Microsoft Excel and Works, have limitations in terms of operational risks. He goes on to say that some of the spreadsheets in the market available today will go probably obsolete due to lack of Sarbanes-Oxley compliance. The Sarbanes-Oxley Act of 2002 is a United States federal law in response to major corporate scandals including Enron, Tyco International, and WorldCom.

If you are dealing with a large spreadsheet, tracking down all the circularities would be a tedious task. Since you have to calculate iteratively when you deal with a spreadsheet with circularities, you might witness higher recalculation time, sometimes ending up with incorrect solutions. Excel apparently inserts the number zero in cells affected by circularity, which may be incorrectly interpreted as the correct value.

Many vendors, such as Spreadsheet Advantage (www.Spreadsheetadvantage.com), are there to help you deal with circularity in spreadsheets.
Custom-built software solutions to track down circularities are able to fetch you the circularities in minimal time. All you need to do is submit your spreadsheet containing circularities to the circularity finding software and the software will generate a list of all the circularities in your spreadsheet. Software solutions from vendors such as Advantage for Analysts (www.advantageforanalysts.com) include capabilities like handling circularities in spreadsheets, goal-seeking and optimization.

In another productive approach to circularity, Cliff T. Ragsdale, Department of Business Information Technology Virginia Polytechnic Institute and State University, Blacksburg, USA, uses circularities and array formulas to implement project management systems. His formula helps in determining the critical activities in a project network, irrespective of the amount of activities involved in the project.

While circularity in spreadsheets is can be used intentionally to solve specific problems, it may be difficult to get the right answers when circularity in spreadsheets is involved.
About the Author
David Stockwell PhD is helping people to develop and market web-sites by applying statistics similar to those developed in ecology to discover new species.

Custom Content: From Content Creation to Web Dominance.
Niche Modeling: The Science and Statistics of Niche Modeling.
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