A circular reference means a formula depends, directly or indirectly, on its own cell. Excel cannot work out the answer because it would need the answer to begin.
What causes it
The formula includes its own cell
A total in C10 written as =SUM(C1:C10) includes C10 itself. The sum can never settle.
Two cells depend on each other
A2 refers to B2, and B2 refers back to A2. Neither can be worked out first.
A range accidentally reaches the formula cell
A SUM that was extended one row too far, into its own cell, creates the same loop.
What to do
Excel names the cell in the status bar at the bottom of the window. Go to it and narrow the range so it stops one row short of the formula, or break the chain between the two cells that point at each other.
Questions
Excel offered to turn on iterative calculation, should I?
Only for deliberate cases, such as certain engineering or accounting models that settle over repeated passes. For an ordinary total, a circular reference is a mistake to fix, not a setting to enable.
How do I find the cell causing it?
The status bar shows one address. Formulas, Error Checking, Circular References lists them if there are several.
Set by your computer's language, not by the file. A frequent cause of a correct-looking formula being rejected.
Excel version
XLOOKUP, IFS, TEXTBEFORE and TEXTJOIN need Microsoft 365 or 2021; older versions return #NAME? instead. Choosing the older one switches every walkthrough to a formula that works there.
