Course Outline
Join PRO

What is trend analysis?

Author:
Harold Averkamp, CPA, MBA

Definition of Trend Analysis

In the analysis of financial information, trend analysis is the presentation of amounts from several years all expressed as a percentage of a base year.

Trend analysis conveniently shows the reader certain key amounts for 5 or more consecutive years all expressed in easier to absorb amounts.

Example of Trend Analysis

Assume you want to see the trend of a service company’s revenues, net income, and number of clients during the years 2018 through 2024. With trend analysis you can easily see how these three amounts have changed over the past six years especially in relation to each other.

To illustrate, we will designate 2018 to be the base year and the 2018 amounts will be restated to be 100. The amounts for the years 2019 through 2024 will be presented as the percentages of the 2018 amounts. In other words, each year’s amounts will be divided by the 2018 amounts and the resulting percentage will be presented.

To begin, assume that the revenues for the years 2018 through 2024 were $31,691,000; $40,930,000; $50,704,000; $63,891,000; $79,341,000; $101,154,000; $120,200,000. In relation to the base year, the revenues are restated to: 100, 129, 160, 202, 250, 319, and 379.

Next, assume the net income amounts were divided by the 2018 net income. In relation to the base year, the net income amounts are 100, 147, 206, 253, 343, 467, and 423. Lastly, after the number of clients were divided by the base year number, the amounts as a percent of the base year amounts are: 100, 122, 149, 184, 229, 277, and 317

From this trend analysis we see that

  • Revenues in 2024 were 379% of the 2018 revenues
  • Net income in 2024 was 423% of the 2018 net income
  • Number of clients in 2024 was 317% of the number in 2018

The trend analysis makes it easier to see how effective and efficient the company has been in its recent years.

Join PRO to Track Progress

Features

Free

PRO

Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Dictionary
Bookkeeping Video Training
Financial Statements Video Training
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Flashcards
Crossword Puzzles
Word Scrambles with Coaching
Bookkeeping Study Guide
Managerial and Cost Accounting Study Guide
Certificates of Achievement
Bookkeeping Certificate of Excellence
Business Forms
Printable PDF Files
Progress Tracking
Motivational Badges and Points
Motivational Medal Rankings
Motivational Activity Streaks
Public Profile Page of Achievements

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Read 3,033 Testimonials

PRO for Teams
  • Easily onboard new users and team admins
  • Monitor individual user progress and grades
  • Monitor team progress and compare users
  • View average grades and find problem areas
  • Monitor recent activity and user achievements
PRO for Teams
Take the Tour Join Pro Upgrade to Pro