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Why are trend analysis and industry comparison important to financial ratio analysis?

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Question added by Divyesh Patel , Assistant Professional Officer- Treasury , City Of Cape Town
Date Posted: 2014/04/06
Mohamed Nabil Alsaid  Osman
by Mohamed Nabil Alsaid Osman , Chief Accountant , Rawaa Hospitality for Contracting Co

The Ratio and Trend analysis Can Evaluate the performance of the established end of the year and is one of the tools used in the control disclosure of strengths and weaknesses and analyze the financial situation of the business and comparison with competitors.

MAJOUL Fadhel - CPA- CIA-CFE-CRMA-CISI
by MAJOUL Fadhel - CPA- CIA-CFE-CRMA-CISI , Consulting role related to Internal Audit , Dublin Investment & Management of Health Services Co

The ratio and trend analysis can reveal misstatements in the FS or changes in the economic conditions. The benchmarking of the ratios to concurrent, gives an idea about the efficiency of the company and how she is doing compared to competitors.

This in general, why they are important to ratio analysis? simply because they can be considered a reference to be compared to.

SREEDEVI SUNILKUMAR
by SREEDEVI SUNILKUMAR , Business finance officer , Emirates Airline

 

Trend analysis helps financial managers and analysts see whether a company's current financial situation is improving or deteriorating.Cross-sectional analysis, or industry comparison, allows analysts to put the value of a firm's ratios in the context of its industry

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