The document discusses trend analysis in financial statements, emphasizing its use in predicting future stock movements based on historical data. It highlights the advantages of trend analysis such as ease of calculation and accuracy, while also noting limitations like the influence of base year selection. Additionally, it provides examples of vertical financial statements for practical understanding.

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4. Introduction
Advantages
Limitations
How to prepare it?
Format
Primary Data
Sum
Conclusion
Bibliography
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5. An aspect of technical analysis that tries to predict the
future movement of a stock based on past data.
Trend analysis is based on the idea that what has
happened in the past gives traders an idea of what will
happen in the future.
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6. •When one wants to use historical data to
predict future.
•When one wants to Compare the current values
with the past values.
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7. •Trend shows the direction of the change.
•Trend are easy to calculate, interpret and understand.
•It is a quick method of analysis.
•It is more accurate.
•It reveals potentially fruitful areas of audit investigation.
•It is being readily accepted due to its widespread use
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8. •Choice of base year.
•No. of years
•Different accounting policies.
•It provides little insight into the root causes of variation
•It is being heavily influenced by the choice of the base
fiscal period
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9. •It is Calculated in percentage.
•Draw the format.
•Assign the particulars and amount
respectively.
•Take 100% in base years % column.
•To find out the further years % value
apply the formula:
Current year x100
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10. Vertical financial statement of (trend analysis)
Particulars 2005 (Rs.) 2006 (Rs.) 2007 (Rs.) 2005 (%) 2006 (%) 2007 (%)
Sources of fund
a. Share holders fund
(i) Share capital xx xx xx 100% xyz% xyz%
(ii) Reserves/ Surplus xx xx xx 100% xyz% xyz%
Net worth xxx xxx xxx 100% xyz% xyz%
b. Borrowed fund
(i) Secured fund xx xx xx 100% xyz% xyz%
(ii)unsecured fund xx xx xx 100% xyz% xyz%
Capital employed xxxx xxxxx xxxxxx 100% xyz% xyz%
Application of fund
a. Fixed assets xx xx xx 100% xyz% xyz%
b. Investments xx xx xx 100% xyz% xyz%
c. Working capital
(i) Current assets xx xx xx 100% xyz% xyz%
(ii) current liabilities xx xx xx 100% xyz% xyz%
working capital (i-ii) xxx xxx xxx 100% xyz% xyz%
Capital employed xxx xxxx xxxxx 100% xyz% xyz%
Total capital employed xxxxx xxxxxx xxxxxx 100% xyz% xyz%10GROUP-3

11. Vertical income statement of (trend analysis)
Particulars 2005 (Rs.) 2006 (Rs.) 2007 (Rs.) 2005 (%) 2006 (%) 2007 (%)
Net sales xxxxx xxxxxx xxxxxx 100% xyz% xyz%
less: C.O.G.S xx xx xx 100% xyz% xyz%
Gross Profit xxx xxxx xxxxx 100% xyz% xyz%
less: Operating exp.
a. Administrative exp. xx xx xx 100% xyz% xyz%
b. Selling exp. xx xx xx 100% xyz% xyz%
c. Financial exp. xx xx xx 100% xyz% xyz%
Operating profit xxx xxx xxx 100% xyz% xyz%
add: Operating income xx xx xx 100% xyz% xyz%
less: Non-operating exp xx xx xx 100% xyz% xyz%
add: Non-Operating income xx xx xx 100% xyz% xyz%
less: Debenture interset xx xx xx 100% xyz% xyz%
less: Tax xx xx xx 100% xyz% xyz%
Profit after tax before
appropriation xxxxx xxxxxx xxxxxx 100% xyz% xyz%
less: Appropriation xx xx xx 100% xyz% xyz%
Retained Earning xxxx xxxxx xxxxxx 100% xyz% xyz%
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12. Data of- Rassaz Multiplex
Given by- Mr. Ritesh,
Accountant
Contact no.- 28114682
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13. Q1. Which kind of financial statement does your
institute follw? (i.e Horizontal or Vertical)
Vertical
Q2. Why vertical statement?
It reports each amount as a percentage of
another item.
Q3. Which format does your institute opt in vertical
statement?
comparative
Q4. Why comparative and not the others?
It is Easy to compare with previous year item.
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14. Particulars 2001 (Rs) 2002 (Rs) 2003 (Rs)
Share capital 50,000 50,000 50,000
Reserves/ Surplus 5,000 10,000 10,000
Secured loan 3,000 5,000 5,000
Unsecured loan 2,000 6,000
60,000 65,000 71,000
Q1. From the following balance sheet
prepare trend analysis:
Solution:
Vertical financial statement of (trend analysis)
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15. Particulars 2001 (Rs) 2002 (Rs) 2003 (Rs) 2001 (%) 2002 (%) 2003 (%)
Sources of fund
a. Share holders fund
(i) Share capital 50,000 50,000 50,000 100% 100% 100%
(ii) Reserves/ Surplus 5,000 10,000 10,000 100% 200% 200%
Net worth 55,000 60,000 60,000 100% 120% 120%
b. Borrowed fund
Secured loan 3,000 5,000 5,000 100% 166.67% 166.67%
Unsecured loan 2,000 - 6,000 100% - 300%
5,000 5,000 11,000 100% 100% 220%
Total capital Employed 60,000 65,000 71,000 100% 108.33% 118.33%
Reserves/surplus: 2002 % 2003%
10,000 x100 =200% 10,000 x100 =200%
5,000 5,000
Net worth: 60,000 x100 =120% 60,000 x100 =120%
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17. •http://www.accounting4manage
ment.com/horizontal_analysis_or
_trend_analysis.htm
•http://www.sao.state.tx.us/resou
rces/Manuals/Method/data/16tre
ndd.pdf
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