91Ó°ÊÓ

It is a method of making comparative study of financial statements over a series of accounting year. More specifically its a statistical device of identifying direction, speed and extends of trends in individual items in financial statements over a long period of time.It is calculated as follows:

$\mathbf{Trend}\mathbf{\%}\mathbf{=}\frac{\mathbf{Accountingnumberofcurrentyear}}{\mathbf{Accountingnumberofbaseyear}}\mathbf{×}\mathbf{100}$

Net revenue, net income and ending common stockholder’s equity as follows:

Calculate trend analysis for each item for 2017-2019 by using 2016 as the base year:

Note: Using 2016 as the base year.

Calculate rate of return on common equity for 2017-2019:

For 2019:

$\begin{array}{rcl}\mathbf{Rateofreturnonequity}& \mathbf{=}& \frac{\mathbf{Netincome}\mathbf{-}\mathbf{-}\mathbf{Preferreddividend}}{\mathbf{Averagecommonshareoutstanding}}\\ & \mathbf{=}& \frac{\mathbf{\$}\mathbf{60}\mathbf{,}\mathbf{000}\mathbf{-}\mathbf{\$}\mathbf{0}}{\left(\frac{\$352,000+\$368,000}{2}\right)}\\ \mathbf{}& \mathbf{=}& \mathbf{16}\mathbf{.}\mathbf{667}\mathbf{\%}\end{array}$

For 2018:

$\begin{array}{rcl}\mathbf{Rateofreturnonequity}& \mathbf{=}& \frac{\mathbf{Netincome}\mathbf{-}\mathbf{-}\mathbf{Preferreddividend}}{\mathbf{Averagecommonshareoutstanding}}\\ & \mathbf{=}& \frac{\mathbf{\$}\mathbf{38000}\mathbf{-}\mathbf{\$}\mathbf{0}}{\left(\frac{\$326,000+\$352,000}{2}\right)}\\ \mathbf{}\mathbf{ }\mathbf{ }& \mathbf{=}& \mathbf{11}\mathbf{.}\mathbf{209}\mathbf{\%}\end{array}$

For 2017:

role="math" localid="1656690545281" $\begin{array}{rcl}\mathbf{Rateofreturnonequity}& \mathbf{=}& \frac{\mathbf{Netincome}\mathbf{-}\mathbf{-}\mathbf{Preferreddividend}}{\mathbf{Averagecommonshareoutstanding}}\\ & \mathbf{=}& \frac{\mathbf{\$}\mathbf{36000}\mathbf{-}\mathbf{\$}\mathbf{0}}{\left(\frac{\$296,000+\$326,000}{2}\right)}\\ \mathbf{ }\mathbf{ }& \mathbf{=}& \mathbf{11}\mathbf{.}\mathbf{576}\mathbf{\%}\end{array}$