Percent change is a very common calculation in finance. It helps us track growth. The formula is:
[(y2 - y1)/y1] x 100 = percent change
If the start period is $0 (i.e. no money was made in the first period, so
y1 is 0), the formula divides by 0, which is mathematically meaningless.
However, pragmatically, we understand that there is still meaning in the change. Some people think it should reflect a 100% change, an option that seems sensible to me. Others say infinity, which is not sensible at all. I've seen some opt to just change the start period to 1, than calculate, which could yield anything, but that can lead to skewed values in more complex calculations, not to mention changes that are orders of magnitude different than what you might expect. Then the purists insist that the only correct answer is
In finance, what is the convention for this issue. If I have
y1 = 0 and
y2 = 896, what is the percent increase? What do my manager and investors expect to see?
Personally, as a manager and business owner, I want to see
100% with an asterisk note:
y1 = 0.