What is one of the most critical tasks of managers and business owners? Understanding how the past impacts the future! And a trend ratio analysis is an invaluable tool that helps with just that.
In this article, we discuss the examples of trend ratio analysis, its types, and how it’s conducted.
🔝 Top 5 Trend Ratio Analysis Example Papers
- General Motors Company's Strategies and Policies
- Lowe’s Companies Inc.’s Consolidated Balance Sheets
- Financial Ratio of Apple and Samsung
- Fairfax Media Limited: Company Analysis
- Ryanair: Financial Analysis
💡 What is Ratio Trend Analysis?
- A ratio is a comparison of two numbers and how they are related to each other. In company analysis, ratios are used to determine how numbers from the financial statement are correlated to get a more profound understanding of its operations.
- A trend is the overall direction that a certain finance parameter takes during a specific period.
Therefore, ratio trend analysis evaluates a market trend.
Why Is Ratio Analysis Important?
The main aim of ratio analysis is to help analysts and managers determine the fiscal health of their organizations. It also helps to establish where the company is headed by comparing current fiscal records to the past ones. The ratio analysis is done through an evaluation of the accounting records, such as finance-related statements.
Why Is Trend Analysis Important?
The main purpose of trend analysis is to show the general direction of the market within a specific period of time so that a manager can make the right decisions and benefit from them. Moving along with the trends is always more profitable than going against them.
🚀 How to Do a Trend Analysis
Here are the main steps to follow to conduct a reliable trend analysis:
|Step one||Establish the entity that you will be analyzing. Is it an entire business or a department of a company? It can also be a project for a specific organization.|
|Step two||Determine the trend analysis type (we will discuss them in the next section) and formula you will be using.|
|Step three||Define the time frame for the analysis and draw the key objectives.|
|Step four||Select the type of data that will be used and the model of gathering it. There are different types of fiscal data, from income statements to balance sheets, which you can use.|
|Step five||Gather data and analyze it using suitable methods. Advanced cloud accounting-related methods would come in handy at this point.|
|Step six||Use percentages and charting to make presentations and identify trends. Are the parameters you were focusing on decreasing or increasing? Are there predictable valleys or peaks?|
📚 Types of Ratio Analysis
Ratio analyses can give analysts and managers insights into an organization’s operating efficiency, profitability, and liquidity. They fall into different categories, each with different advantages and disadvantages. Here are the main ones:
Ratios of Market Prospect
These ratios are mainly used in fundamental analysis, especially in predicting future performance. They are divided into different types, including earnings per share (EPS), dividend payout ratio, future performance, and dividend yield.
Ratios of Liquidity
This type of analysis evaluates a business’s capacity to pay its short-term debts as their due dates approach. It is calculated using the company’s quick assets. The main liquidity ratios are the quick, current, and working capital ratios.
Ratios of Coverage
These ratios are used to assess a business’s ability to meet interest payments and other debt-related obligations. The main examples of such ratios include the debt-service coverage ratio and times interest earned ratio.
Ratios of Solvency
These ratios gauge an enterprise’s debt levels with its earnings, equity, and assets. Therefore, they help to predict the probability of the company staying afloat in the long term by clearing long-term debts and associated interests.
Ratios of Efficiency
These ratios are used to gauge how effectively a company utilizes its liabilities and assets to drive sales and optimize profits. They include inventory turnover and turnover ratio. The days sales in inventory is another awesome trend ratio analysis example.
Ratios of Profitability
These ratios are used to determine how effectively a company is able to generate profits through its operations. Notable examples of such ratios include return on equity, gross margin ratios, and a profit margin.
Check out the essay samples on the web page below for more ratio trend analyses.
🎓 Ratio Analysis Research Paper Examples
- Liberty International Plc: Performance AnalysisBusiness essay sample: An analysis of financial performance of Liberty International Plc has been carried out for a period of three years. The basic financial tools used for this analysis are financial ratios.
- Krispy Kreme Hospitality Company's Strategic AnalysisBusiness essay sample: The KK Company has been struggling hard to survive in the marketplace; and by so doing, they gained the capabilities to capture an excellent market share.
- Saudi Arabia Fertilizer CompanyBusiness essay sample: Saudi Arabia Fertilizer Company is one of the largest corporations in Saudi Arabia which is in the business of manufacture and distributing fertilizer, oil, and gas.
- Analysis of Saudi International Petrochemical CompanyBusiness essay sample: The study analysis of the financial statements determine the condition of a business and out to spot financial patterns and trends that threaten the existence of the company.
- Accounting for ManagersBusiness essay sample: This paper intends to prepare trend analysis and financial ratios from a minimum of four years for the Woolworths Limited under the food distribution.
- Trend Ratio Analysis for EXXONBusiness essay sample: Exxon is a multinational gas company that operates in various parts of the world. It is a brand name, and it deals in various products related to fuel.
- Morrison’s and Sainsbury’s Comparative Financial AnalysisBusiness essay sample: MRW is a United Kingdom-based company engaged in the operation of retail supermarket stores. Its business is mainly related to food and grocery.
- The Pudong Coffee Shop AnalysisBusiness essay sample: The analysis of the Pudong Coffee Shop company is in three aspects financial performance, projection, and recommendations.
- Contemporary Financial Management and AccountingBusiness essay sample: Profitability ratios determine the performance of an organization by scrutinizing how earnings were made comparative to sales, total chattels and net value.
- Target Corporation Financial AnalysisBusiness essay sample: The profitability ratios of any firm typically begin with the profit margins, the profit margins generally indicate the profit quantity on sales that the firm generates.
- Financial Analysis of PFIN and SWFBusiness essay sample: The preparation of financial statements is an activity that takes place in organizations of all sizes in order to report about the performance of the enterprise.
- Gap Inc. and Hennes & Mauritz (H&M): Company AnalysisBusiness essay sample: The analysis will focus on discussing the history of the companies, evaluating the company's performance, and giving recommendations on which company is suitable for investment.
- The Brambles Limited AnalysisBusiness essay sample: Brambles Limited is a leading logistics company whose headquarters is in Sydney. Recall’s core function is business support through information management.
- Apple Financial Analysis ProjectBusiness essay sample: The Apple Inc company is famous for the production of a wide range of smartphones (iPhones), media players (iPod Touch) and tablet computers (iPad)
- Analysis of AstraZeneca Financial ReportBusiness essay sample: This paper gives an analytical report of financial analysis for a potential investor. Financial data for AstraZeneca for three year period
- An Analytical Presentation for the Custom Snowboards Strategic ExpansionBusiness essay sample: This report identifies some key features of the financial nature that may affect the Custom Snowboards, Inc. company’s ability to access the proposed loan from the bank.
- Ratio Analysis: Accounting ProceduresBusiness essay sample: Leadership is reflected as a comprehensive process that is used to realize goals, motivate other members to work and provide support to accomplish communally negotiated goals.
- Wm Morrison Supermarkets Plc. and J Sainsbury Plc.: Financial AnalysisBusiness essay sample: The Wm Morrison Supermarket’s strategy is to build long term sustainable growth based on its strengths of providing high quality fresh food.
- Analysis of Union National BankBusiness essay sample: Union National Bank is one of the leading banks in the United Arab Emirates. It is a locally based bank headquartered in Abu Dhabi.
- Financial Analysis of Hutchison Whampoa Limited (HWL)Business essay sample: Hutchison Whampoa Limited, formed in 1863, is a publicly traded company based in Hong Kong, China. It is the largest company trading on the Hong Kong Stock Exchange
- Tassal Company AnalysisBusiness essay sample: The analysis demonstrates that the company experienced a significant decline in the share price. This decline was associated with issuing additional shares to finance development.
- Nike Financial Ratio AnalysisBusiness essay sample: Nike has performed better in the critical ratios that fall under liquidity, turnover, profitability, and debt management.