Trend Analysis

Trend analysis is the process of analysis the financial statements by the computing trend of series of information. With the help of trend analysis tool, we determine the directions upward or downward and computation of the percentage relationship that each statement item bear to the same item in the base year. The procedures for calculating the trend analysis are as follow: – (1) the one year is taken as the base year; first and last year should be taken as the base year. (2) Figure 100 is taken as the base year. (3) The base year is taken while calculating the trend percentage. If a figure in another year is less than the figure in the base year then trend percentage less than 100 on another hand if the figure in another year is more than the figure in the base year then trend percentage is more than the 100.

Illustration: – Calculate the trend percentage from the following figure of XYZ Ltd. Taking 2008 as a base year

Year

 

Sales

 

Stock

 

(Rs. In Lakhs) Profits before tax
2008

2009

2010

2011

2012

 

1881

2340

2655

3021

3768

 

709

781

816

944

1154

 

321

435

458

527

627

 

 

 

year

salesstockProfits before tax
Amount

($’000)

Trend

percentage

Amount

($’000)

Trend

percentage

Amount

($’000)

Trend

percentage

2008

2009

2010

2011

2012

1881

2340

2655

3021

3768

100

124

141

161

200

709

781

816

944

1154

100

110

115

133

162

321

435

458

527

672

100

136

143

164

209

Interpretation

The figure of sales show cautiously increases from 2008 to 2012. The percentage in 2012 is 200 as compared to 100 in 2004. The increase in sales is quite satisfactory. The figure of the stock has also continuously increased from 2008 to 2012. The profits before tax continuously increase; profit during 2011 and 2012 is much higher as compared to 2010. We conclude that expansion of firm is good and the figure of sales and profits has doubled in just five years. The profits of the concern have increased more than sales which show that there is proper control in the cost of goods sold, other expenditure and overall performance of the concern.

Leave a Reply

Your email address will not be published. Required fields are marked *


x

Related Posts

Perpetual Inventory System
A company using a perpetual inventory system keeps a continuous record of the physical quantities in its inventory. It records the purchase, or p...
Business Valuation Software
Businesses planning to close, merge or acquire another company need to undergo the process of business valuation. An accurate and up-to-date valu...
Hedge Funds - Meaning
Hedge funds are private investment organisations in Europe and USA. These are generally structured are limited liability partnership with the gen...
powered by RelatedPosts