TREND ANALYSIS

TREND ANALYSIS
•Variation of Horizontal Analysis
•Under trend analysis, the comparison of
financial information extends beyond two
periods, normally five or more. The
computational procedures in a trend analysis
are similar to horizontal analysis
 FINANCIAL RATIO ANALYSIS
•It involves the computation of percentages,
fractions and proportions using certain
formulas. This analysis is designed to
emphasize the meaningful relationships
between financial data.
CLASSIFICATION OF FINANCIAL
RATIO

• Liquidity Ratios
•Activity Ratios (Asset Management Ratio)
• Leverage Ratio (Asset Management Ratio)
• Profitability Ratio
 LIQUIDITY RATIOS
•Provide a measure of the ability of a business
to pay its liabilities.
Ex:
a. Current Ratio – The most commonly used
ratio in measuring the ability to pay its short –
term debts.
CURRENT RATIO FORMULA

•Current Ratio = Current

Assets/Current Liabilities
 LIQUIDITY RATIO
b. Liquidity Ratio/acid test ratio – a
much stricter ratio used to measure
the ability of a business to pay its
short term obligation
WORKING CAPITAL RATIO

•Quick ( Acid-Test)Ratio =
Quick Assets/Current
Liabilities