Republic of the Philippines

Province of Rizal
Municipality of Montalban
Colegio de Montalban
Kasiglahan Village, San Jose, Montalban, Rizal
colegiodemontalban.official@gmail.com
Contact # 8-296-8667

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

MIDTERM EXAMINATION
IN
MANAGERIAL ACCOUNTING (ELEC 2A)

SPECIAL ACTIVITY ASSIGNED

TO THOSE WHO HAVE INCOMPLETE REQUIREMENTS

Date: Nov 8, 2023

Course/Section: BSBA HRM -1D
Last Name: BONGAY First Name: RALPH JUSTIN ZHEN Middle Initial: N/A

1. What is the objective of financial statements analysis? - The main objective of the financial
statement analysis for any company is to provide the necessary information required by the
financial statement users for informative decision making, assessing the current and past
performance of the company, predicting the success or failure of the business, etc.
2. What are the most commonly used techniques in the analysis and interpretation of financial
statements? - Several techniques are commonly used as part of financial statement analysis.
Three of the most important techniques are horizontal analysis, vertical analysis, and ratio
analysis.
3. Discuss the steps in analyzing financial statements using trend percentages? - You can measure
trend percentages for one or multiple accounts to determine areas of weakness or strength in a
company's financial statements. To best review trend percentages, organize them in a table with
one column per year and one row per account. Here are the steps to calculate trend
percentages
1. Select the base year or period
The base year or period refers to the earliest or first year of the trend, with which you compare
the balances in each subsequent year. Have at least two years of historical financial statement
data. The more years you include, the more perspective you can get on changes to your
accounts.
For instance, if you want to calculate trend percentages for the three most recent years, the
financial statement figures from three years ago represent your base-year data to which you
compare the other two years.

2. Assign a weight of 100% to the figures or amounts that appear on the base-year financial
statements
In the second column of your financial statement, write "100%" to represent the base-year
percentage. For example, say you want to calculate the trend percentage for 2017, 2018 and
2019. Your base year would be the year 2017, so you have to replace the values under that year
with "100%". Use the percentage symbol instead of spelling it out.

Career Guide
Career development
How To Calculate Trend Percentage (With Examples)
How To Calculate Trend Percentage (With Examples)
Updated October 17, 2023

An office employee signs papers on a desk near a laptop.

When you analyze a company's financial statement, it's essential to compare accounts over
multiple years to determine any trends. For easier comparison, you can turn each account's
dollar amount into a trend percentage. Using trend percentages, you can easily determine
whether an account has decreased or increased each year compared to the base year.

In this article, we explore what a trend percentage is, discuss how to calculate trend
percentages and provide some examples of trend percentage calculations.

What is a trend percentage?

A trend percentage, also called an "index number," lets you compare financial information, such
as net sales, cost of goods sold, operating expenses, gross profit and inventory, over time to a
base period or year. It's a form of horizontal analysis that reveals a change or trend in a
company's financial statement accounts over a period of time.

Calculating trend percentages is a part of trend analysis. Trend analysis, which is considered a
type of comparative analysis, is the process of analyzing the current trends to predict future
ones. This can include attempting to identify whether current market trends—such as gains in a
specific market sector—are likely to carry on, as well as whether trends in one market area
could cause trends in another. While a trend analysis may require a large amount of data,
there's no guarantee that the outcome will be correct.

Proper trend analysis doesn't end after you calculate the decreases and increases in trend
percentages or amounts over several years. Such changes usually indicate areas that are worthy
of further analysis or investigation and are just clues that may result in significant findings.
Precise predictions depend on several factors, such as political and economic conditions,
promotional outlays, plant expansion, management plans for new products and expected
competitor activity. Taking these factors into account, along with trend analysis, vertical analysis
and horizontal analysis, gives you a reasonable basis for forecasting future performance.

How to calculate trend percentages

You can measure trend percentages for one or multiple accounts to determine areas of
weakness or strength in a company's financial statements. To best review trend percentages,
organize them in a table with one column per year and one row per account. Here are the steps
to calculate trend percentages:

1. Select the base year or period

The base year or period refers to the earliest or first year of the trend, with which you compare
the balances in each subsequent year. Have at least two years of historical financial statement
data. The more years you include, the more perspective you can get on changes to your
accounts.

For instance, if you want to calculate trend percentages for the three most recent years, the
financial statement figures from three years ago represent your base-year data to which you
compare the other two years.

2. Assign a weight of 100% to the figures or amounts that appear on the base-year financial
statements
In the second column of your financial statement, write "100%" to represent the base-year
percentage. For example, say you want to calculate the trend percentage for 2017, 2018 and
2019. Your base year would be the year 2017, so you have to replace the values under that year
with "100%". Use the percentage symbol instead of spelling it out.

3. Compute the trend percentage for the second year

To calculate the trend percentage for the second year, divide the dollar amount in the second
year by the dollar amount in the base year, and then multiply the result by 100.

For instance, say your small company had $30,000, $40,000 and $25,000 in cash in the years
2017, 2018 and 2019, respectively. Your base-year balance is $30,000. You have to divide
$30,000 by itself and then multiply the outcome by 100 to get 100% for the base-year trend
percentage. The trend percentage for the base year is always 100. To calculate the trend
percentage for 2018, you have to divide $40,000 by $30,000 to get 1.33, and then multiply it by
100. The result, which is 133%, is your trend percentage for 2018.

If the trend percentage is greater than 100%, it means the balance in that year has increased
over the base period. However, if the trend percentage is less than 100%, it means the balance
has decreased below the base year level in that particular year.

Negative trend percentages represent negative numbers. If the base year amount is negative or
zero, the trend percentage calculated will not be meaningful. If an account's amount is usually
shown as a negative number, such as treasury stock, consider each amount as a positive number
when computing trend percentages.

4. Write your result as a percentage in the third column

Once you get the trend percentage for the second year, write the result as a percentage in the
third column on your financial statement to represent the percentage of the second year. For
instance, write "133%" in the second column to represent the growth of the cash account in the
second year compared to the base year.

5. Calculate the trend percentage for the third year

To calculate the trend percentage for the third year, divide the amount of the account in the
third year by the amount in the first year and then multiply the result by 100. In the example
above, you would divide $25,000 by $30,000 and then multiply by 100 to arrive at 83.33%.
Because the trend percentage is less than 100%, the account has decreased compared to the
base year.
6. Write your result as a percentage in the fourth column
After getting the trend percentage for the third year, write the result as a percentage in the
fourth column on your financial statement to represent the third year's percentage. For
instance, write "83.33%" in the fourth column to show that the account decreased in the third
year compared to the base year.