Managerial Accounting, v1.0 "Chapter 13, Section 1: Trend Analysis of Financial Statements"

You have already seen ‘trend analysis’. You called it ‘least squares’ or ‘regression analysis’, better still linear regression analysis. This was discussed in Unit 3. Here you look at how relevant variables move (increase or decrease) over time. The idea is to use that movement to spot problems, i.e. declining profits or increasing sales. Trend analysis looks for both strengths and weaknesses. It separates out one-time events and negates the need for anecdotal evidence. It is an objective measure of performance over time. The time measured can be year to year or for multiple years. This method is also known as horizontal analysis.