Determining whether a firm's financial position is improving or deteriorating requires analyzing more than the ratios for a give
1 answer:
This is true! Analysis of more than just the ratios for a particular year is necessary to determine whether a firm's financial position is improving or deteriorating.
One technique for determining how a firm's performance has changed over time is trend analysis.
Trend analysis uses historical data, including price changes and trade volume, to forecast the long-term course of market sentiment. Because it contrasts the movement in each line item across time periods to derive useful insights, it pretty much exactly indicates the change either in terms of amount or as a percentage change year-over-year.
By deducting the base year amount from the current year amount, one can arrive at the formula for trend analysis:
Current Year Amount – Base Year Amount = Change in Amount
The formula for trend analysis can also be used to calculate the percentage change by dividing the difference between the current year's amount and the base year's amount by the base year's amount:
Change in Amount / Base Year Amount = Percentage Change
Learn how to calculate trend analysis for revenues and net income here: brainly.com/question/15218118
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