__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: -____Brevity and Readability: -__The trend clearly reflects the increase or decrease in the various facts of business from the past to the present or from the year to year. The direction of change can be even more clearly represented by graphs and diagrams, where the change can be noted even with glimpse.__Direction of Changes: -____Easy to Understand and Easy to Calculate: -__There is Less Chances of errors under this method, because results obtained by percentage changes of data can be compared with absolute changes.__Fewer Chances of Errors: -__

__LIMITATIONS OF TREND ANALYSIS__
Analyzing the financial statement
through trend percentages and trend ratios, the following limitations must be
taken into consideration:-

__No Significance of Single Percentage or Ratio: -__The inferences drawn on the basis of simply trend ratios, without keeping in view the original absolute figures may be sometimes illogical and misleading. It is essential to study the original data along with trend ratios.__Illogical and Misleading Conclusions: -__The comparison of trend ratio may be unscientific and inconsistent if principles and practices followed were not kept uniform and consistent throughout the period of analysis. It is necessary that the accounting policies and practices are not changed throughout the period. The and then comparison can be realistic__Unscientific and Inconsistent: -__