Income Statement Trend Analysis

Horizontal analysis also known as trend analysis is a financial statement analysis technique that shows changes in the amounts of corresponding financial statement items over a period of time.

Income statement trend analysis. The term trend analysis refers to one of the most useful analytical tools employed for financial analysis of statements such as income statements balance sheets and cash flow statements. It also indicates changes in the firm s financial position as well as variations in operating investing and financing cash flows. It is a useful tool to evaluate the trend situations. A trend percentage greater than 100 0 means the balance in that year has increased over the base year.

The income statement also known as the profit and loss p l statement is the financial statement that depicts the revenues expenses and net income generated by an organization over a specific. Trend analysis provides a means to analyze company data over a period of time by focusing on the change in specific line items within the income statement and balance sheet. A trend percentage of less than 100 0 means the balance has decreased below the base year level in that particular year. However simply noting for example that sales are higher by 1 million this year.

Changes are typically measured in dollars and. The base year trend percentage is always 100 0. Trend analysis provides a means to analyze company data over a period of time by focusing on the change in specific line items within the income statement and balance sheet. A negative trend percentage represents a negative number.

In other words trend analysis compares the movement in each line item across time periods in order to draw actionable insights. This analysis is used to understand the cost structure of a business and its ability to earn a profit. The statements for two or more periods are used in horizontal analysis. Changes are typically measured in dollars and.