Thanks for the quick response. I understand that this has less significance at run time, but my actual question was something else which is little tricky. Let me explain my question with a small example.

Let us say, we have 2 rulesets defined in the same application -- ABC and XYZ. In the application stack, ABC is above XYZ, which means at run time any rule in the ruleset ABC can reference any rule in the ruleset XYZ. As per the self study course which I mentioned in my above post, any rule in XYZ can also reference any rule in ABC (at least at design time), since they both are in the same application and have Application Validation enabled.

Copying the content from the course below,

If the AV mode is used, rules in the ruleset can reference all rules in the rulesets defined in the:

• Same application

Coming back to my question again - what would be the significance of allowing such rule referencing? (XYZ to refer ABC in my example above)

Thanks!

Thanks again for the reply. But there is 1 key point which is missing - the one I expect as per the lesson. You have mentioned -  Ruleset3 can reference rules in Ruleset4, Ruleset1 & Ruleset2 and  Ruleset4 can reference rules in Ruleset3, Ruleset1 & Ruleset2.

But my question is, why would Ruleset4 refer Ruleset3, when the Ruleset3 is always going to be above Ruleset4 in the application ruleset stack. What would be the significance/use of it? Let us consider only 1 application in this case, which is your  Application2.