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प्रश्न
Explain the usefulness of trend percentages in interpretation of financial performance of a company.
उत्तर
The Trend Analysis presents each financial item in percentage terms for each year. These Trend Analyses not only help the accounting users to assess the financial performance of the business but also assist them to form an opinion about various tendencies and predict the future trend of the business.
Usefulness and Importance of Trend Analysis
The following are the various importance of Trend Analysis:
1. Assists in forecasting
The trends provided by Trend Analysis help the accounting users to forecast the future trend of the business.
2. Percentage Terms
The trends are expressed in percentage terms. Analysing the percentage figures is easy and also less time consuming.
3. User Friendly
As the trends are expressed in percentage figures, so it is the most popular financial analysis to analyse the financial performance and operational efficiency of the company. In other words, one need not to have an in-depth and sophisticated knowledge of accounting in order to analyse these percentage trends.
4. Presents a Broader Picture
The trend analysis presents a broader picture about the financial performance, viability and operational efficiency of a business. Generally, companies prefer to present their financial data for a period of 5 or 10 years in forms of percentage trends, whereas the other techniques of Financial Analysis lack this popularity.
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संबंधित प्रश्न
What are Comparative Financial Statements?
What do you mean by Common Size Statements?
Describe the different techniques of financial analysis.
What is the importance of comparative statements? Illustrate your answer with particular reference to comparative income statement.
Answer the following question:
X Ltd. redeemed ₹ 1,00,000, 9% debentures at 10% premium. What will be the amount of 'Cash Flows from financing activities'?
Consider the following statements.
Statement 1 - "Comparative statements are the form of horizontal analysis."
Statement 2 - Comparative statements shows the profitability and fin~cial position of a firm for different periods"
The analysis of actual movement of money inflow and outflow in an organization is called ______ analysis.
______ is a tool for analyzing the financial statements of any enterprise.
What is the procedure for calculating trend percentage?
Consider the following statements.
Statement 1 - "Cash Flow Statement is a tool of financial statement analysis".
Statement 2 - Cash flow statement is usually prepared by companies which comes as a tool in the hands of users of financial information to know about the sources and uses of cash.
Vertical Analysis is also known as ______.
Pick the odd one out:
Consider the following statements given below:
- In Common-size Balance Sheet, each item is converted into the percentage of share capital.
- In Common-size Statement of Profit and Loss, each item is converted into the percentage of total expenses.
- In Comparative Statement of Profit and Loss, absolute and percentage change in the items during two periods of time are calculated.
Choose the correct option:
Main objective of the Common Size Balance Sheet is:
