# Trend Analysis

Trend analysis involves the usage of past figures for comparison. Trend percentages are calculated for some important items like sales revenue, net income etc. Under this kind of analysis, information for a number of years is taken up and one year, which is usually the first year, is taken as the base year. Each item of the base year is taken as 100 and on that base, the percentage for other years are computed. This analysis will help in finding out the percentage of increase or decrease in each item with respect to the base year.

Example:

Calculate the trend percentages from the following figures of a company, assuming 2000 as the base year.

 Year Sales Net Income 2000 \$100,000 \$10,000 2001 \$120,000 \$12,500 2002 \$160,000 \$20,000 2003 \$90,000 \$8,000 2004 \$150,000 \$18,000

Solution:

 Year Sales Trend Percentage Net Income Trend Percentage 2000 \$100,000 100 \$10,000 100 2001 \$120,000 120 \$12,500 125 2002 \$160,000 160 \$20,000 200 2003 \$90,000 90 \$8,000 80 2004 \$150,000 150 \$18,000 180

Workings:

If the trend percentage 100 represents \$100,000 sales, then \$120,000 worth of sales would have a trend percentage of => 100/\$100,000 x \$120,000 => 120.

If the trend percentage 100 represents \$10,000 net income, then \$8,000 worth of net income (in year 2003) will have a trend percentage of => 100/\$10,000 x \$8,000 = 80 and so on.

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