The correct answer is: A. Trend analysis
Trend analysis is a technique used to compare financial statements of a company over a period of time to identify trends and patterns. It is a horizontal analysis, which is a comparison of financial statements of the same company over a period of time. Intra-firm comparison is a comparison of the financial statements of different companies within the same industry.
Trend analysis is a useful tool for investors and analysts to track the performance of a company over time. It can be used to identify areas of strength and weakness, and to make predictions about future performance.
Here is an example of trend analysis:
A company’s net income for the past five years is as follows:
Year | Net Income
——- | ——–
2017 | $10 million
2018 | $12 million
2019 | $14 million
2020 | $16 million
2021 | $18 million
As you can see, the company’s net income has been increasing steadily over the past five years. This is a positive trend, and it suggests that the company is doing well.
However, it is important to note that trend analysis can only be used to identify trends, not to make predictions about future performance. The company’s net income could start to decline in the future, even though it has been increasing steadily in the past.
Therefore, it is important to use trend analysis in conjunction with other financial analysis techniques to get a complete picture of a company’s performance.