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Trend Analysis
June 07 , 2012

Trend analysis of ratios indicates direction of change. This kind of analysis is particularly applicable to the items of profit and loss account.

It basically calculates the percentage change for one account over a period of time of two years or more. To calculate percentage change between two periods:

  1. Calculate the amount of increase/(decrease) by subtracting values from the previous year from the later year. If the difference is positive the change is an increase, if negative it is a decrease.
  2. Divide the change by the earlier year's balance. The result is the percentage change.

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