The process involves repeating a calculation multiple times, using the result of one calculation as an input for the next. This is especially useful when a formula depends on its own outcome, creating a circular reference. A common scenario where this is employed is in financial modeling, where values like interest depend on the total loan amount, and the loan amount, in turn, depends on the interest accrued.
This computational method facilitates the modeling of complex scenarios and the approximation of solutions that would otherwise be difficult or impossible to derive directly. Historically, this approach enabled spreadsheet software to tackle problems involving circular dependencies, broadening its applicability in various fields such as engineering, economics, and statistics. Enabling this functionality allows for solving problems that converge towards a stable solution over multiple recalculations.
