Hello Dr. Oâ€™Neal, and Classmates
Trend analysis is used in businesses to project future outcomes. It can also be used as an early indicator of impending problems (Metcalf, 2018 ). Trend analysis is a â€œprecise tool for anticipating events, to forecast market trends market trends, sales growth, inventory levels and interest rates â€œ (Metcalf, 2018.pg.1 ). It is said that with trend analysis, the use of numbers make forecasting more exact. However there are challenges that an administrator should consider when preparing a trend analysis over a 5 year period. A major challenge entails identifying turning points in a business. â€œWith hindsight, turning points are clearly visible, but it can be difficult to tell in the moment whether they are mere aberrations or the beginning of a new trend â€œ (Metcalf, 2018,pg.3 ).
Another challenge an administrator may encounter when preparing a trend analysis entails an increase in data demand, maintain accurate data, along with data security (trend analysis can be replicated ). This can all be comprised into this statement â€œ that they must achieve a level of fiscal health to be sustainable over the long- term ( City of Cody, 2013 pgs.1-3 ). There are a few advantages in trend analysis for the next 5 years (long-term ) 1) improve the quality of information, 2) identifying emerging trend in order to take proactive action, 3) provide a graphical analysis, 4) utilize the trends of specific financial indicators to get budget priorities (City of Cody, 2013.pg.4).
City of Cody, 2013. 5 Year Financial Trend Report (pdf ). Retrieved from www.cityofcody.wy.gov
Metcalf, Thomas, 2018. The Pros & Cons of Trend Analysis in Forecasting. Retrieved from www.smallbusiness.chron.com