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Module 12. Trend Analysis

The document presents a trend analysis of a company's financial performance over five years, highlighting sales, cost of goods sold, gross profit, operating expenses, and profit. While sales increased from Year 2 to Year 5, the cost of goods sold rose at a faster rate, leading to a decline in profit. Recommendations include reassessing pricing policies and product costs to improve profitability.

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108 views9 pages

Module 12. Trend Analysis

The document presents a trend analysis of a company's financial performance over five years, highlighting sales, cost of goods sold, gross profit, operating expenses, and profit. While sales increased from Year 2 to Year 5, the cost of goods sold rose at a faster rate, leading to a decline in profit. Recommendations include reassessing pricing policies and product costs to improve profitability.

Uploaded by

petalsofcherrys
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Trend

Analysis/Percentages
Module 9
Year 1 Year 2 Year 3 Year 4 Year 5

Sales 250,000 270,000 295,000 300,000 450,000

Cost of Goods Sold 120,000 148,500 162,250 180,000 315,000

Gross Profit 130,000 121,500 132,750 120,000 135,000

Operating expenses 65,000 68,000 70,000 71,500 75,000

Profit 65,000 53,500 62,750 48,500 60,000


Using Year 1 as the base year, we develop
the following percentage relationships.

Year 1 Year 2 Year 3 Year 4 Year 5


Sales 100% 108% 118% 120% 180%
Cost of Goods
Sold 100% 124% 135% 150% 263%
Gross Profit 100% 93% 102% 92% 104%
Operating expenses 100% 105% 108% 110% 115%
Profit 100% 82% 97% 75% 92%
Let’s Try!

Year 1 Year 2 Year 3 Year 4 Year 5


Sales
Cost of Goods
Sold
Gross Profit
Operating expenses
Profit
How to do it?
• Step 1- Select the base year (or year 1)
• Step 2 – year 2 amount – base year (year 1) amount x 100 = to convert into
percentage
• Step 3 – continue with the rest of the years
Year 1 Year 2

Sales 250,000 270,000


Base year
Cost of Goods Sold 120,000 148,500

Gross Profit 130,000 121,500

Operating expenses 65,000 68,000

Profit 65,000 53,500

250,000/250,000 x 100 = 100%


Year 1 Year 2

Sales 100% 108% 270,000/250,000 x 100 = 108%

Cost of Goods Sold 100% 124% 148,500/120,000 x 100 = 124%

Gross Profit 100% 93% 121,500/130,000 x 100 = 93%

Operating expenses 100% 105% 68,000/65,000 x 100 = 105%

Profit 100% 82% 53,500/65,000 x 100 = 82%


Year 1 Year 3

Sales 250,000 295,000


Base year
Cost of Goods Sold 120,000 162,250

Gross Profit 130,000 132,750

Operating expenses 65,000 70,000

Profit 65,000 62,750

250,000/250,000 x 100 = 100%


Year 1 Year 3

Sales 100% 118% 295,000/250,000 x 100 = 118%

Cost of Goods Sold 100% 135% 162,250/120,000 x 100 = 135%

Gross Profit 100% 102% 132,750/130,000 x 100 = 102%

Operating expenses 100% 108% 70,000/65,000 x 100 = 108%

Profit 100% 97% 62,750/65,000 x 100 = 97%


Trend Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Sales 100% 108% 118% 120% 180%

Cost of Goods Sold 100% 124% 135% 150% 263%


Gross Profit 100% 93% 102% 92% 104%
Operating expenses 100% 105% 108% 110% 115%
Profit 100% 82% 97% 75% 92%

• As you can see, the trend of company’s sales was increasing from year 2 to
year 5. However, the increases of cost of goods sold overweighs the
increases in sales which cause the decreases in the profit of the company.
The company should look into its pricing policy and product costs in relation
to its prices.

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