Trend analysis (Trend Analysis) is an important method to help businesses determine the pattern of growth or decline of the financial ratios over time. By analyzing the data in more than one accounting period in a row (usually from 3 to 5 years), businesses can identify trend forecasting financial long term forecast the future and adjust your trading strategy accordingly.
This method helps businesses answer the important questions:
- Revenues are sustainable growth, or just the most volatile time?
- Net profit there is a corresponding increase in revenue, or costs are increasing no control over?
- Cash flows are stable over the period, or business is experiencing liquidity problems?
Trend analysis can be applied for revenue, profit, cash flow, expenses, liabilities, equity and many indicators other financial.
1. The steps to perform analysis of financial trends
Step 1: collect – standardized financial data
Business needs to collect data from financial statements for at least 3-5 consecutive years, including:
- Net sales
- Gross profit net profit
- Cash flow from business operations
- Total assets, liabilities, equity
Data should be standardized to ensure consistency in accounting methods. If the business changes to accounting policies or accounting adjustments, need clear notes.
Step 2: Calculate the rate of growth or change over time
There are two common ways to measure financial trends:
a) growth Method according to the percentage (%)
The growth rate is calculated according to the formula:
Growth rate = [(value, current year – to-value year ago)/value year ago]×100
For example, if the revenue in the year 2024 is 500 billion, in the year 2023 is 450 billion, the rate of revenue growth is: (500-450)450×100=11.1%
This method helps business rate growth of financial indicators over time.
b) analysis Method according to the index base (Index Analysis)
Choose a year root as a landmark (usually the first year in the data) and performing the financial ratios as a metric basis. Calculation formula is as follows:
Index base = (value current year/year value original)x100
For example, if revenue 2020 is 300 billion, in the year 2024 is 500 billion, index, base year 2024 compared to 2020 is:
500300×100=166.7
This means that revenue has increased by 66.7% compared with the year the original 2020.
Step 3: Draw chart trend financial
Data after the calculation will be performed on the line chart (line chart) or column chart (bar chart) to easily recognize trends.
For example:
- If revenue continues to grow, but net profit increase slowly or is reduced, this may signal that the operating costs or cost of goods sold is increasing.
- If cash flow business activity tends to decrease despite increased sales, the business may experience issues about debt collection or management, cash flow, yet effective.
Step 4: Determine the cause of the trend
After identifying the trend, businesses need to understand the causes behind the change:
- Revenue growth slow is due to market saturation or increased competition?
- Net profit decrease is due to increased interest costs for business loan debt more?
- Negative money flow is due to customers for late payments or business too much investment in fixed assets?
The in-depth analysis of the impact factor will help business solutions timely adjustment.
Step 5: Forecast financial trends in the future
Based on historical data, businesses can use the model to forecast financial as:
- Methods linear regression (Linear Regression): predicting future trends based on past trends.
- Model ARIMA (Auto-Regressive Integrated Moving Average): predict the business cycle are based on data long time.
- AI and Machine Learning: Using algorithm machine learning to analyze big data make forecasts more accurate.
For example, if the rate of revenue growth average of 5 years is 12%/year, businesses can forecast revenue next year by applying this percentage to the revenue of the current year.
2. Practical application of the analysis, trend forecasting, corporate finance
Trend analysis, revenue, profit
- If revenues increase but the rate of gross profit decreased, businesses need to reconsider our strategy, selling price, cost of production or operating costs.
- If net profit increased more slowly than revenue, so there may be financial costs (interest on loans) or tax increases.
Trend analysis, cash flow
- If cash flow from operations, business continuity ocean, this is the sign of strong financial.
- If cash flow from investing activities in many consecutive years, businesses can now expand operations or long-term investment.
Trend analysis liabilities and equity
- If the ratio of debt to equity (D/E) increases, the business can now sponsor works by loan debt more than equity capital, increases the financial risks.
- If equity increased by retained earnings big business might accumulate capital to expand the business or increase investment.
Trend analysis, cost
- If sales charges, management fees rising faster than revenues, enterprises need to reconsider the operational efficiency.
- If financing costs rise quickly, can do business are more debt or the interest on the loan increases.
3. Benefits of the method of trend analysis
- Increased accuracy in financial analysis: AI analyze data in real time, limit errors in comparison with financial analysis crafts. Automatically adjust the model to forecast based on the latest data, which helps businesses always have a financial plan updates.
- Save time cost in trend analysis: Reducing the synthesis time financial data from various sources. Limit the cost of hiring financial experts using AI to forecast trends auto.
- Help business leaders make decisions fast, accurate: early Warning of financial risks, help businesses proactively dealt with before problems become serious. Provide financial reports with detailed data visualization, support CEOS, CFOS in the financial planning investment.
4. Lac Viet Financial AI Agent – engine, trend forecasting, smart finances for business
Lac Viet Financial AI Agent is a solution for advanced applications, artificial intelligence (AI) and historical data to forecast financial trends to help businesses seize the opportunity, control risks, optimize financial decisions.
4.1 introduction to Vietnam Financial AI Agent
Lac Viet Financial AI Agent is a platform Business Intelligence (BI) combines AI dedicated to analysis and financial forecasting. This tool helps businesses:
- Forecast financial trends based on historical data, support businesses make strategic decisions in a timely manner.
- Visualizing financial data in real time, helping business leaders track financial volatility quickly.
- Deeply integrated with the accounting system and ERP help sync data quickly, reduce errors in the analysis process.
Lac Viet Financial AI Agent to solve the “anxieties” of the business
For the accounting department:
- Reduce workload and handle end report states such as summarizing, tax settlement, budgeting.
- Automatically generate reports, cash flow, debt collection, financial statements, details in short time.
For leaders:
- Provide financial picture comprehensive, real-time, to help a decision quickly.
- Support troubleshooting instant on the financial indicators, providing forecast financial strategy without waiting from the related department.
- Warning of financial risks, suggesting solutions to optimize resources.
Financial AI Agent of Lac Viet is not only a tool of financial analysis that is also a smart assistant, help businesses understand management “health” finance in a comprehensive manner. With the possibility of automation, in-depth analysis, update real-time, this is the ideal solution to the Vietnam business process optimization, financial management, strengthen competitive advantage in the market.
4.2 Feature highlights of Lac Viet Financial AI Agent in the forecast financial trends
a) Forecast financial trends from historical data
Lac Viet Financial AI Agent using AI algorithms and Machine Learning to analyze financial data in the past, forecasts of key indicators such as:
- Trends in turnover/profits: Projections of revenue, expenses, net profit in the next period.
- Trends cash flow: Forecast cash flow in/out, help business proactive financial planning.
- Trend liabilities/receivables: Determine the risk of late payment or loss for cash flow.
- Trends in operating costs: the cost factor tends to increase, the proposed optimal scheme.
For example, If AI finds revenues tend to decline in the 3rd quarter in a row, the system can propose the strategic adjustment of the budget, cost optimization or raise capital in a timely manner.
b) data Integration accounting and ERP to analyze trends auto
- Connect directly with AccNet, SAP, the ERP system downloads, help collect financial data from multiple sources.
- Sync data in real time, ensure that the business always has the latest data for analysis.
- Automatically detect deviations in the data, warning the unusual transactions that may affect financial trends.
For example, If AI finds your advertising costs spike that does not bring profit margin respectively, the system will alert the proposed tuning strategy marketing.
c) visualizing data using dashboard actions
- Showing financial trends using interactive charts, to help businesses easily identifiable pattern of growth or decline.
- Compare the trends between the states accounting business help track financial performance over many years.
- Custom financial criteria, which helps business focus on the most important metrics.
For example, A business can see trend charts revenue in recent 5 years, and to recognize the growth phase to adjust the trading strategy accordingly.
d) AI support financial decisions based on trend forecasting
Lac Viet Financial AI Agent not only forecast the trend, but also gives hints financing strategy based on the prediction model:
- Hint optimize costs when the trend costs increase faster than revenue.
- Propose the right time to raise capital based on trends cash flow.
- Early detection of the risk of losing balance financial and proposed solutions.
Trend analysis is not only to help businesses understand the financial situation at present but also plays an important role in forecasting financial planning for the future. When combined with other tools, Business Intelligence (BI) such as Power BI, Tableau, Looker or AI, businesses can automate trend analysis, financial decisions more quickly.
Thanks to the method of trend analysis, businesses can proactively adjust financial strategy, avoid risk, maximize opportunities for sustainable growth.
