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Trend Analysis

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24 views13 pages

Trend Analysis

Uploaded by

rexlapislolol
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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TREND ANALYSIS

(Financial statement)
Dr. Ashish Siddiqui,
BK School, GU.

Compiled by Dr.Ashish Siddiqui


Introduction
• Trend analysis of financial statements involves evaluating financial
data over some time to identify patterns, trends, and changes in a
company's performance.
• This analysis helps stakeholders, such as investors, management, and
creditors, to make informed decisions about the company's financial
health and prospects.
•

Compiled by Dr.Ashish Siddiqui


Here's a step-by-step guide on how to perform
trend analysis on financial statements.
• Select the Financial Statements:
• Choose the financial statements you want to analyze. The
most common ones are the income statement, balance sheet,
and cash flow statement.
• Collect Data:
• Gather financial statements for multiple periods. This could
be quarterly or annually, depending on the availability of data
and the level of detail you need.
Compiled by Dr.Ashish Siddiqui
Here's a step-by-step guide on how to perform
trend analysis on financial statements.
• Standardize the Data:
• Ensure that the data is comparable by standardizing it.
• You can use percentages, ratios, or other metrics to express each line item as a
percentage of a base value (e.g., total revenue, total assets).
• Calculate Growth Rates:
• Compute the year-over-year or period-over-period growth rates for each line
item.
• This is done by taking the difference between the current and previous periods
and dividing it by the previous period's value.
• Identify Trends:
• Look for patterns and trends in the growth rates.
• Positive trends may indicate improving financial performance, while negative
Compiled by Dr.Ashish Siddiqui
trends could suggest potential issues.
Here's a step-by-step guide on how to perform
trend analysis on financial statements.
• Compare Against Industry Benchmarks:
• Benchmark the company's performance against industry standards.
This provides context for understanding whether the company's
performance is in line with or deviating from industry norms.
• Evaluate Key Ratios:
• Analyze key financial ratios, such as profitability ratios (e.g., net profit
margin), liquidity ratios (e.g., current ratio), and solvency ratios (e.g.,
debt-to-equity ratio), over time.
• Consider External Factors:
• Take into account external factors that may have influenced the
trends, such as changes in the economy, industry conditions, or
regulatory environment. Compiled by Dr.Ashish Siddiqui
Here's a step-by-step guide on how to perform
trend analysis on financial statements.
• Assess Overall Financial Health:
• Summarize your findings and assess the overall financial health of the
company. Pay attention to any red flags or areas that may require
further investigation.
• Communicate Findings:
• Present your trend analysis findings in a clear and understandable
manner. Visual aids such as charts and graphs can enhance the
presentation of trends.

Compiled by Dr.Ashish Siddiqui


Here's a step-by-step guide on how to perform
trend analysis on financial statements.
• Remember that trend analysis is just one tool in the financial analysis
toolbox.
• It should be used in conjunction with other methods and
considerations to get a comprehensive understanding of a company's
financial performance.
• Additionally, it's important to interpret trends in the context of the
company's specific circumstances and industry dynamics.
• For practical understanding PTO…..

Compiled by Dr.Ashish Siddiqui


Compiled by Dr.Ashish Siddiqui
Compiled by Dr.Ashish Siddiqui
Compiled by Dr.Ashish Siddiqui
Assignment

Compiled by Dr.Ashish Siddiqui


Assignment

Compiled by Dr.Ashish Siddiqui


Compiled by Dr.Ashish Siddiqui

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