In horizontal analysis if an item has a negative amount in the base year and a positive amount in the following year no percentage change for that item can be computed.

Question

Quizplus · Accepted Answer

This is because percentage change is calculated by taking the difference between two amounts and dividing by the base year amount. If the base year amount is negative, dividing by it would result in an undefined or meaningless percentage change.

In Horizontal Analysis If an Item Has a Negative Amount