Low base effect
Concept in business and economics
From Wikipedia, the free encyclopedia
Low base effect in business and economics is the tendency of a small absolute change from a low initial amount to be translated into a large percentage change.[1][2]
In the following example, focusing solely on the 33.3% growth of Company B in year 5 may give a misleading indication of the company's relative performance versus Company A.
| Initial | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Company A Value | 100 | 120 | 140 | 160 | 180 | 200 |
| Change | – | 20 | 20 | 20 | 20 | 20 |
| %Growth | – | 20 | 16.7 | 14.3 | 12.5 | 11.1 |
| Company B Value | 100 | 90 | 80 | 70 | 60 | 80 |
| Change | – | -10 | -10 | -10 | -10 | 20 |
| %Growth | – | -10 | -11.1 | -12.5 | -14.3 | 33.3 |
