Time Trend Analysis - Assignment Example

Time Trend Analysis Time Trend Analysis Time trend analysis is a useful for the financial management as it provides the analysis of the data over a period of time. It is a type of longitudinal ecological study. It can help the financial manager in making decisions which are important for the company. Time Trend Analysis is very useful as it can provide the analysis of the financial ratios over a long period. If the data about financial ratios over a period of a time is available and analyzed then it is easier for the financial manager to trace the trend of the ratios which will help them in making important financial decisions.

Pfizer Inc. is a well known American company and we will analyze its financial ratios.YearsCurrent RatioReturn on AssetsReturn on Equity20132.4112.3027.9420122.157.8017.8420112.065.2311.7820102.114.059.2920091.665.3311.71The financial ratios which include current ratio, return on assets and return on equity have been gathered of the past five years for the analysis.A general trend or a movement can be easily seen on the financial ratios. There is no certain rate at which they are increasing or decreasing.

If we consider current ratio we can see that the current ratios are increasing from year 2009 to 2010 but then it declined in the year 2012. From 2012 onwards the current ratio is increasing which means that the company is improving and it has the capability of paying its short term debts (Financial Report, 2013).Similarly, if we consider return on assets and return on equity of the company over a period of 5 years, we can see a trend. In this case also there is no particular rate at which the ratios are increasing or decreasing.

The increase and decrease in the ratios depends upon the performance of the company. From these ratio analyses we can find out how much strong and secure a company is. On the analysis of return on assets and equity, we can see a trend. In the year 2010 both the ratios decreased as compared to the previous year but after 2010 the ratios have kept on increasing till 2013, which represents good performance of the company (Brigham & Ehrhardt, 2007).The ratios move in the direction described because of the performance of the company.

The ratios will move in an upward direction if the company is performing well and will go downward if the performance of the company is not good in the market (Shapiro, 2009).If we compare the financial ratios of Pfizer Inc. with the financial ratios of Abbott Laboratories, we will find a difference in the trend of both the companies. The ratios of Abbott Laboratories are very different as they have kept on increasing and decreasing over the past 5 year which is unlike Pfizer Inc. If we only compare the ratios of both the companies of the year 2013 we will have a clear view that Pfizer is a better company as compared to Abbott Laboratories because the return on assets and equity of Pfizer has increased and that of Abbott Laboratories has decreased.

Reference ListBrigham, E., & Ehrhardt, M. (2007). Financial Management: Theory & Practice. Stamford: Cengage Learning.(2013). Financial Report. New York: Pfizer Inc.Shapiro, A. C. (2009). Multinational Financial Management. New Jersey: John Wiley & Sons.