Showing posts from 2014


GRAPHIC OR DIAGRAMMATIC PRESENTATION OF TREND RATIO The trend percentages or Ratios can also be represented by graphs and diagrams. Change in two or three different variables may also be represented. The graph and diagrams are being used in publish accounts to show changes in sales, profit and all other important items. Even data for different past years regarding various items of the statements are re presented by graphs and diagrams. For example, the gross income of X.Co.Ltd. For the last five years can be represented with the help of diagram and bar diagram as follows:- IMPORTANCE OF TREND ANALYSIS Trend analysis occupies an important place in the financial analysis of the financial statements due to the following merits. Comparative Study: -The trend analysis is of immense help in comparative study of different from the point of view of forecasting and budget.Brevity and Readability: -The method of trend analysis is useful for the management and also the common man since by substitutio…

Trend Analysis : an important tool of Analysis and interpretation of financial statements

TREND ANALYSIS Trend Analysis is also an important tool of Analysis and interpretation of financial statements. Trend means tendency in general term. The Comparative financial statements study changes which have occurred in each item of the balance sheet and profit and loss account within a period of two years but do not indicate the trend of progress during past years. Trend analysis discloses changes in the financial and operating data of financial statements between specific periods in relation to any past year called the base year and makes possible for the analyst to form an opinion about the favorable or unfavorable tendencies as reflected by the accounting data. This method of Analysis is immensely helpful in making Comparative Study of Financial Statements for several years.
The trend analysis of business operations and other financial data may be done in any of the following ways:- Trend Percentage Trend Ratios Graphic or Diagrammatic presentation


TYPES OF FINANCIAL STATEMENT ANALYSIS It is depend upon the user for which purpose they have used financial statement. User used financial statement according to their purpose from different angles. Generally various type of financial statement are classify into three (03) group depending upon The nature of the analyst and material used by him.The objective of analysis.The modus operandi of analysis.
According to the analyst and material used by him: - There are two types of analysis. External analysisInternal analysis External analysis:-External Analysis is comprises of those people who are not directly related or concern with the business. For examples include creditor, investor, government agency, etc. 
Internal analysis: - Internal Analysis is comprises of those people who are directly related or concern with the business and have the right to assess the book of accounts.  For examples Chairman Cum Managing, directors,  trustee, etc.
On the basis of objective of analysis:- There are two…