A company has the following earnings per share figures: Year 1 (base period): $2.12; Year 2: $2.26; Year 3: $2.42; Year 4: $2.56; and Year 5: $2.71. What is the trend ratio at the end of Year 3 for this company?
Trend analysis compares financial data across periods by using a base year as the benchmark. The trend ratio is calculated by dividing the current year figure by the base year figure and multiplying by 100. Here, Year 1 is the base period with earnings per share of $2.12. Year 3 earnings per share are $2.42. The calculation is $2.42 divided by $2.12, multiplied by 100, which equals approximately 114.15. Rounded to the nearest whole number, the trend ratio is 114. Option D would be closer to Year 2’s trend ratio, not Year 3. Option C incorrectly treats the Year 3 EPS as a ratio. Therefore, the correct answer is 114.
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