Iterative calculation, a feature within spreadsheet software, is a process where a formula refers back to its own cell, either directly or indirectly. This functionality allows Excel to solve circular references by recalculating the worksheet repeatedly until a specific numeric condition is met or a maximum number of iterations is reached. For example, one might use it to model a loan where the interest payment affects the principal balance, which in turn influences the subsequent interest payment. Without enabling this feature, circular references would result in an error message.
Enabling iterative calculation is crucial for handling complex financial models, engineering simulations, and scientific computations where values are interdependent and require repeated adjustments to converge on a solution. Historically, spreadsheet programs defaulted to preventing circular references to avoid infinite loops and application crashes. The introduction of this feature provided a way to harness the power of circular references while maintaining control over the computational process. It offers a means to approximate solutions to problems that may not have closed-form analytical solutions.
