Trend Analysis

August 12, 2014 By Dave Chase

Trend analysis is a critical, and all too often overlooked, element of understanding what is happening in one’s business.  Far too often we see that companies are looking only at the unformatted, current period financial statements.  By doing so, they are missing a valuable opportunity to be educated by their financials statements about the current period performance, but also the likely near-term performance of their business.

Business cycles vary widely by industry, but typically, a one-year look by month (graphically where possible) at the key financial metrics of a business is ideal.  Identifying the key financial metrics to measure is a critical step as well that shouldn’t be glossed over.  In addition to a one-year look, a more detailed trend analysis of the past 3 months and a comparison to the same period from the prior year are two other great comparators and teachers.  Below are some examples:

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TrendAnalysis

There are many ways to accomplish and view these trends including: reporting software packages (local or in the cloud), accounting software, or simply excel, to name a few.  Some are better than others, but as long as you’re looking at the data in the right way, you’re learning.  Here is a brief but helpful ehow.com treatise on the subject.

David Chase has experience in small to medium private companies and large public companies as a senior operational and financial leader.  With 14 years in finance, a CFO of multiple entities and divisional EVP experience, Dave has a breadth of experience.  Dave has led or been instrumental in raising multiple rounds of equity and debt in excess of $450 million.

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