The financial portion of a firm is improving or deteriorating over the years. This is made possible by the use of trend analysis. The significance of a trend analysis of ratios lies in the fat that the analyst can know the direction of movement i.e., whether the movement is favorable or un-favorable for example : The ratio may be low as compared to the norm or standard, but the trend way be upward. On the other hand through the present level may be satisfactory but the trend may be declaring one thus trend analysis is the great significance.
Ratios can be classified on the basis of exposition into four broad groups.
- Liquidity Ratio
- Leverage Ratio
- Profitability Ratio
- Activity Ratio
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