2k20

Lecture 3

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COURSE INSTRUCTOR: SHAGUFTA SALEEM SHAIKH BATCH: BBA-2K20
 TOOLS OF FINANCIAL STATEMENT
ANALYSIS
1. Comparative Statements
2. Common-Size Statements
3. Trend Ratios/TrendAnalysis
4. Statement of changes in working capital
5. Funds Flow & Cash flowAnalysis
6. Ratio Analysis

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 3. Trend Ratio/Trend Analysis

•A trend analysis is an
aspect of technical analysis
that tries to predict the future
movement of a stock based
on past data.

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 Definition
• A trend analysis is a method of analysis that
allows traders to predict what will happen
with a stock in the future.
• Trend analysis is based on historical data
about the stock's performance given the
overall trends of the market and particular
indicators within the market.

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 Why we make Trend Analysis?
• A trader may be able to match purchases and sales
of particular stocks, maximizing his or her potential
for profits.
• Trend analysis establishes the pattern for elements in
the financial statement over a period and will give
an indication of grey areas in the financial statement.
• Evaluate company performance over a period of
time.
• Comparing one time period to another time period.
• Making future projection.
• Comparing with other organizations.
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 When to use it?
•When one wants to use historical data
to predict future.

•When one wants to Compare the current

values with the past values.

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 Advantages
• Trend shows the direction of the change.
• Trend are easy to calculate, interpret and understand.
• It is a quick method of analysis.
• It is more accurate.
• It reveals potentially fruitful areas of audit investigation.
• It is being readily accepted due to its widespread use

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 How to prepare it?

• It is Calculated in percentage.
• Draw the format.
•Assign the particulars and amount respectively.

• Take 100% in base years % column.

•To find out the further years % value apply the

formula:
Current year x100
Base year
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 Example
Calculate the trend percentages from the following figures of Samir
Auto Ltd. Taking 2010 as the base and interpret them:

SALES (Rs. In Profit After Tax

YEAR Thousands) (Rs. In Thousands)
2010 1,000 150
2011 1,200 185
2012 1,500 210
2013 2,000 220
2014 2,900 240

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 Solution
Trend Percentages (Base year 2010 as 100)

YEAR SALES Trend Percentage PAT Trend Percentage

2010 1,000 100 150 100
2011 1,200 120 185 123.33
2012 1,500 150 210 140
2013 2,000 200 220 146.67
2014 2,900 290 240 160
Interpretation:
(i) The sales have continuously increased in all the years up to 2014. The percentage in
2014 is 290 compared to 100 of base year. The increase in sales is quite satisfactory.
(ii) The figures of profit have also increased over the years.

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 Practice Problem
Calculate the trend percentages from the following
figures and interpret them:

TREND ANALYSIS
YEAR SALES STOCK EBT (lakhs)
2018 1881 709 321
2019 2340 781 435
2020 2655 816 458
2021 3021 944 527
2022 3768 1154 672

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 THANK YOU
End of the Lecture

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