Trend Analysis，also called Horizontal Analysis，shows the changes in a company's financial condition and operating results in percentages as well as in dollar amounts from one year to the next.It can tell the analysts whether the numbers in certain items are increasing or decreasing over time，reflecting the trends in many fields.

To see how trends develop over time，analysts often look at several years'worth of a company's financial information such as the last five years，ten years and even more longer.To compute the trend changes，we must select the base year，whose amounts are set equal to the base-year amount or to 100 percent.The formula of computing the dollar amounts change and the percentage change is shown as follows:

Amount of Change=Current Amount－Base-year Amount

Tables 11-1 and 11-2 show how trend analysis works of the STE Company.

Table 11-1

续表

The STE Company's balance sheet in Table 11-1 shows that the total assets and total liabilities and total stockholders'equity have risen during the past year by $43，000 or 9.45%.The increase in assets is caused mainly by long-term assets，the current assets also have increased.The total increase in liabilities and stockholders'equity is caused by the most items of current liabilities.

Table 11-2

The STE Company's income statement in Table 11-2 shows that sales increase of 25%，exceed the 14.29%increase in cost of goods sold，causing a 33.33% increase in gross profit.That's good news.But operating expenses also increased by 37.14%.In total，the 25%increase in sales led to 20%increases in net income.