In Regards to Trend Analysis Over Time, Which of the Following

question 32

Multiple Choice

In regards to trend analysis over time, which of the following statements is TRUE?

• A) We often look at the past five years of financial statements to establish trends and then predict future performance based on these trends.
• B) To look at trends over time requires that we examine a financial statement at one point in time.
• C) The net income last year was $20,000 and the past five years has shown an increase of 10% on average for each of these five years. The predicted net income for next year is still $20,000.
• D) It is better to predict future performance by basing it solely on net income than on all the individual accounts.

---

Definitions:

Compounded Quarterly

Interest calculation method where the interest earned is added to the principal every quarter, increasing the amount on which subsequent interest is calculated.

Small Claims Court

A court that deals with minor legal disputes involving small monetary amounts.

Compounded Monthly

This is the calculation of interest on an investment or savings where the interest earned each month is added to the principal, thereby increasing the amount on which future interest is calculated.

Fair Rate

A reasonable, equitable interest rate or charge for a loan or service, ensuring fairness to both the provider and the consumer.