Trend Analysis Essay

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Historical trends

Historical trend / time series analysis is the used in the framework to compare the performance of a SME over time and to predict/ forecast future trends.
By collating, calculating and analyzing historical trends, a pattern can be inferred. Consequently, assumptions can be made using these trends for the future.
Reliability of financial statements is of essence while performing trend analysis as inaccurate and inconsistent information can hinder analysis or give an inaccurate assumption of the future. Similarly, changing accounting policies/ reporting standards can hinder analysis. Careful and accurate trend analysis is of utmost importance while drawing down assumptions for the future, such as, sales growth, is an essential number whilst valuing the SME.

Budgets

Budgets are a quintessential financial tool in any business, irrespective of the size. Budgets help chalk out how much cash will be required by each unit, expected revenue and expenses and more importantly a budget helps pinpoint variances between the budgeted figures and the actual figures. An SME face...

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