Trend Analysis Formula (Table of Contents)

## What is the Trend Analysis Formula?

The term “Trend Analysis” refers to one of the most useful analytical tools hired for economic analysis of statements including earnings statements, balance sheets, and cash float statements. In other phrases, fashion evaluation compares the movement in each line object throughout time periods so that it will draw actionable insights. It essentially shows the exchange both in phrases of amount or as a percent change 12 months over year (Y-o-Y).

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The formulation for fashion evaluation (change in quantity) may be derived by way of subtracting the base year quantity from the modern-day 12 months quantity. Mathematically, it is represented as,

The method for trend evaluation (percent alternate) can be derived by using dividing the choices difference among the choices contemporary year amount and the choices base yr quantity through the choices base 12 months quantity. Mathematically, it’s miles represented as,

Let’s take an instance to recognize the calculation of the Trend Analysis Formula in a better way.

Let us take the instance of a employer DFG Inc. that’s engaged in the production of custom designed system components. The following earnings statement statistics is available for the choices closing five years:

Trend Analysis is calculated using the trade in amount components given underneath.

Change in Amount = Current Year Amount – Base Year Amount

The year 2015 is calculated using the choices above-given formulation.

Similarly, Calculated the year 2016, 2017, 2018 by way of the choices given method.

Trend Analysis is calculated using the proportion alternate components given beneath.

Percentage Change = [(Current Year Amount – Base Year Amount) / Base Year Amount]

The yr 2015 is calculated the use of the choices above-given method.

Similarly, Calculated the choices 12 months 2016, 2017, 2018 via the given formula.

In the above tables, it may be seen that:

Below is the graphical representation of the choices fashion in each line item.

Let us take the example of Apple Inc.’s earnings announcement for the choices 12 months 2018 to demonstrate the choices idea of trend analysis. The following three years’ statistics has been extracted from the choices income announcement:

Trend Analysis is calculated the use of the trade in quantity method given under.

Change in Amount = Current Year Amount – Base Year Amount

The yr 2017 is calculated the use of the choices above-given formulation.

Similarly, Calculated the yr 2018 by way of the choices given method.

Trend Analysis is calculated the use of the share change formulation given below.

Percentage Change = [(Current Year Amount – Base Year Amount) / Base Year Amount]

The 12 months 2017 is calculated the usage of the above-given method.

Similarly, Calculated the yr 2018 via the given system.

In the above tables, it could be visible that:

Below is the choices graphical representation of the choices fashion in every line object.

Source Link: Apple Inc. Balance Sheet

The Trend Analysis Formula can be calculated through the usage of the subsequent steps:

Step 1: Firstly, determine the choices base year after which note down the subject line object’s price within the base year.

Step 2: Next, word down the choices price of the road item within the current yr.

Step three: Now, the choices formula for trend evaluation in phrases of alternate in amount may be derived through subtracting the base year amount (step 1) from the choices contemporary yr quantity (step 2), as shown under.

Change in Amount = Current Year Amount – Base Year Amount

Step four: On the opposite hand, the choices formulation for trend analysis in terms of percentage change can be derived by way of dividing the change in quantity (step three) with the aid of the base 12 months quantity (step 1), as shown below.

Percentage Change = [(Current Year Amount – Base Year Amount) / Base Year Amount]

It is essential to understand the concept of trend evaluation because it facilitates within the assessment of future movement based on historical figures. It is likewise helpful in figuring out any stark deviation, that can imply irregularity in economic reporting or enterprise downtrend. A market is said to be on the uptrend if the choices asset fees flow in an upward route, i.e. preserve growing over a certain time period. On the alternative hand, a downtrend marketplace shows that asset charges are moving in a downward course, i.e. reducing.

You can use the following Calculator:

This is a manual to the Trend Analysis Formula. Here we speak how to calculate it along side sensible examples. We additionally provide a calculator with a downloadable excel template. You may also observe the subsequent articles to learn greater –

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