- Perform a trend analysis on a financial statement
So back when we were talking about Simply Yoga, and the promotion their studio manager offered to students in an effort to increase class attendance, we mentioned looking at the next months to see if the additional students stayed on taking classes. We also talked about some other ways they may increase participation, including new student or “bring a friend” discounts.
Let’s take a look now at a “trend analysis” or horizontal analysis. This involves looking at financial data within a set of financial statements. In this case, we are going to look at two actual income statements for Simply Yoga, covering two quarters of sales and expenses. This can help us to better understand if the promotions are helping to build up the student base, or if changes are needed.
|This Quarter||Last Quarter||Amount||Percent|
|Wages and Salaries||$4,480.00||$4,550.00||($70.00)||−2%|
|Net Operating Income||$2,580.00||$1,860.00||$720.00||39%|
So it looks like our studio manager made a good decision! The quarter she offered the discount brought in more students. Although we lost a little traction in the subsequent quarter, it wasn’t enough to worry about. When we went back, in the new quarter, to full priced classes, the majority of the students stayed! Also, note, our wages went down a bit, but our net income was still higher! Since we paid our teachers the full rate per class, even with the discount to the students in the previous quarter.
Continued monitoring as time progresses will help us to get an even better understanding of the trends from this promotion. Knowing how promotions affect sales, wages and other expenses will help to be able to more successfully implement further programs to increase participation, and ultimately revenues.
Following up quarterly with trend analysis will help to improve overall business function and keep an eye on any issues with revenues or expenses that may need attention! Can you see how important continually monitoring financial statements can be?