Question

A company's sales in year 1 were $370,000 and in year 2 were $407,500. using year 1 as the base year, the percent change for year 2 compared to the base year is:_____.

Answer 1

The percent change for year 2 compared to the base year is:  110%

Given:

Sales in year 1 = Base year = $370,000

Sales in year 2 = $407,500

Increase in Sales % in year 2 = (Sales in year 2 - Sales in base year) / Sales in base year

Increase in Sales % in year 2 = ($407,500 - $370,000) / $370,000 = 10%

Sales trend % in year 2 = 100 % sales of base year + 10% increase in sales in year 2 = 110%

Horizontal Analysis:

Using horizontal analysis which is also called as trend analysis, a technique for analysis of financial statement, we can understand the changes in the items of financial statement over a period of time. For a horizontal analysis to work, there should be financial data relating to two accounting periods. The difference between the base and the current year values of items is divided by the base year to find the percentage of change.

Learn more about Horizontal Analysis :

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