Page 215 - DMGT104_FINANCIAL_ACCOUNTING

Unit 9: Analysis and Interpretation of Financial Statements

1. Trend Percentage/Ratio: To calculate the trend percentage the following procedure is Notes
adopted:
(i) First of all the original figures of the financial statement are set in a statement.

(ii) One year’s figures (the earliest year) are assumed as base year’s figure i.e. 100.
(iii) In order to compute the trend percentage the each and every item of the other years
are divided by the corresponding item of the base year and multiplied by 100.

Illustration 5: From the following items of the asset side of the balance sheet of Alka Ltd. for the
period 31.3.2004 to 31.3.2007, calculate trend percentage taking 2004 as the base year:

in ‘000’
2004 2005 2006 2007
( ) ( ) ( ) ( )
Cash 80 120 160 140
Debtors 40 80 60 30
Stock 100 150 120 140
Other Current Assets 40 20 50 60
Land and Building 800 1,000 1,200 1,200
Furniture 160 200 120 200
Plant 200 250 260 300
Total Assets 1,420 1,820 1,970 2,070

Solution:
Comparative Balance Sheet
From 31st March 2004 to 31st March 2007
(Showing Trend Percentage)
( in ‘000’)
Assets 31 st March Trend Percentage Base 2004 ( Current
Base × 100 )
2004 2005 2006 2007 2004 2005 2006 2007
Current Assets:
Cash 80 120 160 140 100 150 200 175
Debtors 40 80 60 30 100 200 150 75
Stock 100 150 120 140 100 150 120 140
Other Current Assets 40 20 50 60 100 50 125 150
Total Current Assets 260 370 390 370 100 142 150 142
Fixed Assets: 800 1,000 1,200 1,200 100 125 150 150
Land and Building
160 200 120 200 100 125 75 125
Furniture 200 250 260 300 100 125 130 150
Plant
1,160 1,450 1,500 1,700 100 125 136 146
Total Fixed Assets
1,420 1,820 1,970 2,070 100 128 138 145
Total

2. Graphic or Diagrammatic Presentation: The trend percentage/ratio discussed in the
previous method may be represented by graphs and diagrams. Two or three variables can
be represented on graphs very easily. If different variables of the financial statements are
represented by graphs and diagrams, that quickly draws the human attraction. Nowadays
there is a trend to show the important variable on the graphs. These diagrams are also

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