Circular references occur in Excel when a formula, directly or indirectly, refers back to its own cell. This creates a loop where Excel keeps trying to calculate the value of the cell but can't reach a final answer because it depends on itself.

Here's what happens:

* You enter a formula in a cell that references another cell.
* That other cell, in turn, has a formula that refers back to the first cell, either directly (e.g., A1 = B1 and B1 = A1) or indirectly (e.g., A1 = B2, B2 = C1, and C1 = A1).
* Excel gets stuck in an infinite loop trying to calculate the values because each cell depends on the other.

Signs of a circular reference:

* You see an error message like "#REF!" in the cell with the circular reference.
* The formula in the cell might be highlighted with a green border.
* Calculations appear incorrect or keep changing.

How to fix circular references:

1. Check the Formulas Tab: Go to the "Formulas" tab and click the arrow next to "Error Checking." Select "Circular References" from the dropdown menu. This will highlight the cell(s) containing the circular reference.
2. Analyze the Formula: Look at the formula in the highlighted cell and trace the chain of references. Identify the loop where a cell references another cell that ultimately leads back to itself.
3. Break the Loop: This depends on the specific scenario. Here are some common solutions:
* Change the formula: Modify the formula in one of the cells involved in the loop to eliminate the reference back to itself. You might need to adjust the logic or use alternative functions to achieve the desired outcome.
* Rearrange calculations: Sometimes, rearranging the order of your formulas can break the loop. For instance, calculate intermediate values in separate cells before referencing them in the final formula.
* Use absolute references: In certain cases, using absolute cell references (e.g., $A$1) can be helpful to prevent a formula from changing when copied or referenced in other cells. However, use absolute references cautiously to avoid unintended consequences.

Tips:

* Pay attention to how you build your formulas to avoid creating circular references unintentionally.
* Use Excel's built-in error checking tools to identify circular references before they cause problems.
* If you're stuck, search online for solutions related to your specific formula or scenario.

By understanding circular references and how to fix them, you can ensure your Excel spreadsheets function correctly and produce accurate results.