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Stock Financial Trend Analysis

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Financial Trend Analysis is the process of analyzing financial statements of a company for any continuing relationship.

Generally, an analysis is made to find out what direction a concern is going, how rapidly, and whether there are enough resources to complete proposed projects.

The analysis can be done using financial statements that are disclosed by the company from time to time.

The major sources of information necessary for Financial Trend Analysis are

  1. Quarterly Statements
  2. Profit and Loss Account
  3. Balance Sheet
  4. Cash Flow Statement
  5. Shareholding Pattern etc.

The ideal time frame for doing Financial Trend Analysis can be best done soon after a disclosure by the company is being made. In general, this can be best done on a quarterly basis.

Statements on a Quarter-on-Quarter (QoQ) or a Year-on-Year (YoY) can be analysed to identify patterns.

This analysis helps us better undedrstand about the business and the cyclical nature (seasonal etc.) of the business.

Using the analysis, we can make projections as to how the next quarter can be.

The best starting point is to study revenue and cash flow statements because these talk about the flow of money into or out of the company.

Based on the analysis, we can put the Financial Trend Rating in a scale:

  1. Outstanding
  2. Very Positive
  3. Positive
  4. Flat
  5. Negative
  6. Very Negative

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