Trend Percentage:

Definition and Explanation:

Horizontal analysis of  financial statements can also be carried out by computing trend percentages. Trend percentage states several years' financial data in terms of a base year. The base year equals 100%, with all other years stated in some percentage of this base.

Example:

Consider McDonald's Corporation, the largest global food service retailer, with more than 26,000 restaurants worldwide. McDonalds enjoyed tremendous growth during the 1990s, as evidenced by the following data:
 

	2000	1999	1998	1997	1996	1995	1994	1993	1992	1991	1990
Sales(millions)	$14,243	$13,259	$12,421	$11,409	$10687	$9,795	$8,321	$7,408	$7,133	$6,695	$6,640
Income(millions)	$1,977	$1,948	$1,550	$1,642	$1,573	$1,427	$1,224	$1,083	$959	$860	$802

By simply looking at these data, one can see that sales increased every year. But how rapidly sales have been increasing, and have the increases in net income kept pace with the increase in sales? It is difficult to answer these questions by looking at the raw data alone. The increases in sales and the increases in net income can be put into better perspective by stating them in terms of trend percentages, with 1990 as the base year. These percentages (all rounded) appear as follows:

	2000	1999	1998	1997	1996	1995	1994	1993	1992	1991	1990
Sales	215%	200%	187%	172%	161%	148%	125%	112%	107%	101%	100%
Income	247%	243%	193%	205%	196%	178%	153%	135%	120%	107%	100%

The trend analysis is particularly striking when the data are plotted as above. McDonald's growth was impressive through the entire 11-year period, but it was out paced by even higher growth in the company's net income. A review of the company's income statement reveals that the dip in net income growth in 1998 was attributable, in part, to the $161.6 million that McDonalds spent to implement its "Made for you" program and a special charge of $160 million that related to a home office productivity initiative.