Trend Analysis
A Basic Guide
By Deskdemon.com
Definition
Trend analysis is the comparison of a company's past performance with current results.
It is the comparison of figures appearing in the financial statements of a company, for at least 2 consecutive years. Comparing the ratios for the same periods will indicate the trends.
Trend Analysis: What it tells you
Trend analysis will indicate both the changes in monetary amounts as well as the percentage increases or decreases that have taken place.
Comparing more than 2 years' figures will be more reliable, as fluctuations from one year to the next may be exceptional.
Trend Analysis: Who uses it & Why
Internal and external users will use trend analysis to determine weaknesses and strengths. This will enable internal users to improve management of the company when necessary.
External users will be able to establish whether the company is managed well or not.
