Trend Analysis and Common-Size Financial Statements Are Important Analytical Techniques

question 15

Essay

Trend analysis and common-size financial statements are important analytical techniques used to evaluate the strength of published financial statements.
a.Define:
1. trend analysis
2. common-size financial statements b.How is each of these techniques helpful in the analysis of financial statements?

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Definitions:

Independent Variable

A variable presumed to influence or determine the dependent variable in an experiment or study.

Coefficient of Determination

A statistical measure that determines the proportion of variance in the dependent variable that can be predicted from the independent variable(s).

Quadratic Model

A statistical or mathematical model in which the relationship between the independent variable and the dependent variable is represented by a second-degree polynomial or parabolic function.

Quadratic Relationship

A type of relationship between two variables where the relationship can be described by a second-degree polynomial or equation.