Using 2012 as the base year, prepare a trend anslysis for the data that follow, and tell whether the results suggest a favorable or unfavorable trend.(round to one decimal place.
2014. 2013. 2012
Net sales $316,000 $272,000 $224,000
Accounts receivable(net)
2014. 2013 2012
86,000 64,000 42,000
To conduct a trend analysis, we compare the data from different years to the base year (2012) to identify any patterns or trends. Let's calculate the percentage change for each variable:
For Net Sales:
Percentage change in 2013: ((2013 - 2012) / 2012) * 100 = ((272,000 - 224,000) / 224,000) * 100 = 21.4%
Percentage change in 2014: ((2014 - 2012) / 2012) * 100 = ((316,000 - 224,000) / 224,000) * 100 = 41.1%
For Accounts Receivable (Net):
Percentage change in 2013: ((2013 - 2012) / 2012) * 100 = ((64,000 - 42,000) / 42,000) * 100 = 52.4%
Percentage change in 2014: ((2014 - 2012) / 2012) * 100 = ((86,000 - 42,000) / 42,000) * 100 = 104.8%
Based on the trend analysis, here are the results:
1. Net Sales:
- Percentage change in 2013: 21.4%
- Percentage change in 2014: 41.1%
The positive percentage changes suggest a favorable trend for net sales. There is an increase in sales over the years, indicating growth in the company's revenue.
2. Accounts Receivable (Net):
- Percentage change in 2013: 52.4%
- Percentage change in 2014: 104.8%
The significant percentage changes in accounts receivable (net) suggest an unfavorable trend. There is a considerable increase in the amount of accounts receivable over the years, which may indicate issues with collecting payments from customers or an increase in credit sales.
It is important to consider other factors and perform a more detailed analysis to understand the underlying reasons for these trends and their implications for the company's financial health.