How Do You Compute Trend Analysis On A Balance Sheet?
A balance sheet is a snapshot of a company’s financial position at a certain point in time. The accounts listed help determine if the company is facing any type of financial stress. When trend analysis is performed, a company is able to see if its financial position is improving or declining based on the percentage change in the balance sheet accounts. To determine the change, a company will look at the dollar amount of balance sheet accounts over 2 or more years. Review all balance sheet accounts that will be used for trend analysis. Some of the more common accounts on a balance sheet are cash, accounts receivable, inventory, supplies, marketable securities and prepaid insurance. A balance sheet also consists of all the debts or liabilities a company owes. The balance sheet is completed by adding stockholder’s equity or owner’s equity to the equation. Owners’ equity represents the investment in the business by the owners. Determine the years in which the trend analysis will be perform
