Trends

HA401 : The Class : Finance : Revenues : Trends

Trends

Trends are important because they show the direction business operations are going in.

SHORT TERM AND LONG TERM TRENDS

It is important to look at both short term or long term trends. Short term trends often involve seasonality or the expected cycles of a business or industry. A business that is slowing down because of seasonality or an industry cycle should be evaluated differently than a business that is slowing down because of increased competition, product or service quality, or pricing issues. A long term trend is a better evaluator of products or services especially when compared to competitors and industry performance.

COMPANY, INDUSTRY AND ECONOMY TRENDS

Trends can be analyzed from several different perspectives. Are they the result of the success or failure of business operations, the result conditions that effect the industry, or the result of the general economic environment. Trends can result from any or all of these conditions and it is important to identify the causes of trends for the business and the industry.

REVENUES, EXPENSES, AND PROFIT TRENDS

It is important to identify trends in each of these areas. Most importantly, are each trending in the direction to improve or decrease profits. Equally important are which of the above trends are increasing or decreasing faster than the other. For example, if sales are increasing 5% but expenses are increasing 10%, your profit will be decreasing. The best case is if the trend is for increasing sales and decreasing expenses.

Once you have completed this module you should:

Go on to Reading 8: Changes
or
Go back to Topic 1: Revenues

E-mail Lloyd Shelton at Lloyd.Shelton@nau.edu
or call (928) 527-7518