YSK that saying a company “doubled profit” or “division X…
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YSK that saying a company “doubled profit” or “division X generated Y% of total growth” is often misleading or nonsensical
Why YSK: These statements sound precise, but they are percentages built on values that can be negative, zero, or netted against each other. That makes them easy to cherry-pick and logically broken.
YoY profit is the most common example. If a company goes from -1 to +1 in profit, the standard percentage-change formula gives:
(1 - (-1)) / (-1) = -200%
So you get the statement “profit went up by -200%,” which is obviously nonsense. And if that result is nonsense, then flipping the comparison around to produce a positive-sounding percentage does not fix the underlying problem. The issue is using percentage language on a signed quantity in the first place.
The same problem appears in statements like “division A generated X% of total growth.” That can happen when one division grows and another shrinks. The math may be technically derivable, but the wording is still misleading.
Clearer ways to say it:
* Profit improved from a loss of $1M to a profit of $1M
* Profit improved by $2M
* Margin rose from -3% to 2%
* Revenue grew 60% while cost of goods sold grew 80%
* Division A added $4M of profit while Division B lost $1M
These describe what actually happened without hiding behind percentages that can become absurd.
#education
Why YSK: These statements sound precise, but they are percentages built on values that can be negative, zero, or netted against each other. That makes them easy to cherry-pick and logically broken.
YoY profit is the most common example. If a company goes from -1 to +1 in profit, the standard percentage-change formula gives:
(1 - (-1)) / (-1) = -200%
So you get the statement “profit went up by -200%,” which is obviously nonsense. And if that result is nonsense, then flipping the comparison around to produce a positive-sounding percentage does not fix the underlying problem. The issue is using percentage language on a signed quantity in the first place.
The same problem appears in statements like “division A generated X% of total growth.” That can happen when one division grows and another shrinks. The math may be technically derivable, but the wording is still misleading.
Clearer ways to say it:
* Profit improved from a loss of $1M to a profit of $1M
* Profit improved by $2M
* Margin rose from -3% to 2%
* Revenue grew 60% while cost of goods sold grew 80%
* Division A added $4M of profit while Division B lost $1M
These describe what actually happened without hiding behind percentages that can become absurd.
#education
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