Explain the usefulness of trend percentages in interpretation of financial performance of a company.
1) Trend percentages, also referred to as index numbers, help you to compare financial information over time to a base year or period. You can calculate trend percentages by: Compute the percentages by Analysis year amount / base year amount and then multiplying the result by 100 to get a percentage.
2) Trend analysis tries to predict a trend, such as a bull market run, and ride that
trend until data suggests a trend reversal, such as a bull-to-bear market. Trend
analysis is helpful because moving with trends, and not against them, will lead to profit for an investor.
3) Trend analysis can improve your business by helping you identify areas with your organisation that are doing well, as well as areas that are not doing well. In
this way it provides valuable evidence to help inform better decision making
around your longer-term strategy as well as ways to futureproof your business.
4) Trends are an opportunity to do something new not just from an individual
standpoint, but on a macro level. Trends allow us to shift cultural currents and
ultimately depict an underlying intuition.
Popular Questions of Class 12 Accountancy - Company Accounts and Analysis of Financial Statements
- Q:-
How will you disclose the following items in the Balance Sheet of a company;
(i) Loose tools
(ii) Uncalled liability on partly paid-up shares
(iii) Debentures redemption reserve
(iv) Mastheads and publishing titles (v) 10% debentures
(vi) Proposed dividend
(vii) Share forfeited account
(viii) Capital redemtion reserve
(ix) Mining rights
(x) Work-in-progress - Q:-
The current ratio provides a better measure of overall liquidity only when a
firm’s inventory cannot easily be converted into cash. If inventory is liquid, the
quick ratio is a preferred measure of overall liquidity. Explain. - Q:-
The liquidity of a business firm is measured by its ability to satisfy itslong-
term obligations as they become due. What are the ratios used forthis purpose? - Q:-
What relationships will be established to study?
(a) Inventory Turnover (b) Debtor Turnover
(c) Payables Turnover (d) Working Capital Turnover - Q:-
What do you understand by analysis and interpretation of financial statements? Discuss its importance.
- Q:-
State the importance of financial statements to
(i) shareholders
(ii) creditors
(iii) government
(iv) investors - Q:-
What are liquidity ratios? Discuss the importance of current and liquid ratio.
- Q:-
What is the importance of comparative statements? Illustrate youranswer with particular reference to comparative income statement.
- Q:-
What do you mean by Ratio Analysis?
- Q:-
Describe the different techniques of financial analysis and explain the limitations of financial analysis.
Recently Viewed Questions of Class 12 Accountancy - Company Accounts and Analysis of Financial Statements
- Q:-
What are Comparative Financial Statements?
- Q:-
What is the importance of comparative statements? Illustrate youranswer with particular reference to comparative income statement.
- Q:-
How will you disclose the following items in the Balance Sheet of a company;
(i) Loose tools
(ii) Uncalled liability on partly paid-up shares
(iii) Debentures redemption reserve
(iv) Mastheads and publishing titles (v) 10% debentures
(vi) Proposed dividend
(vii) Share forfeited account
(viii) Capital redemtion reserve
(ix) Mining rights
(x) Work-in-progress - Q:-
Explain the limitations of financial statements.
- Q:-
How would you study the Solvency position of the firm?
- Q:-
State the importance of Financial Analysis?
- Q:-
State the meaning of financial statement analysis?
- Q:-
State the importance of financial statements to
(i) shareholders
(ii) creditors
(iii) government
(iv) investors - Q:-
The current ratio provides a better measure of overall liquidity only when a
firm’s inventory cannot easily be converted into cash. If inventory is liquid, the
quick ratio is a preferred measure of overall liquidity. Explain. - Q:-
‘Financial statements reflect a combination of recorded facts, accounting
conventions and personal judgements’ discuss.
- NCERT Chapter