CHAPTER 8 Analysis and interpretation of financial statements 327Step 3: Divide the 2012 revenue by the 2010 revenue, and express this as an index by multiplying the
answer by 100:
$3 127.8 million
×100 = 115
$2 731.3 millionStep 4: Each subsequent year’s sales revenue is divided by the 2010 sales revenue and expressed as an
index by multiplying the answer by 100.
Analysing the trend figures in figure 8.4 identifies that sales revenue has increased each year during
2010–2015. In 2011 and 2012, EBIT and profit after tax declined, but have since trended upwards.
Absolute figures $m 2015 2014 2013 2012 2011 2010
Sales revenue
EBIT
Profit after tax$3 652.1
189.6
136.5$3 483.8
191.5
128.4$3 308.4
178.2
116.6$3 127.8
161.4
104.6$2 959.3
162.6
109.7$2 731.3
175.1
118.7
Trend analysis
Sales revenue
EBIT
Profit after tax134
108
115128
109
108121
102
98115
92
88108
93
92100
100
100FIGURE 8.4 Trends in sales revenue, EBIT and profit after tax figures for JB Hi-Fi Ltd for the period 2010^
to 2015Trend figures can be graphed to visually depict the direction and magnitude of financial items of
interest. For example, the graph of the trends in JB Hi-Fi Ltd’s sales revenue, EBIT and profit after tax
for the period 2010 to 2015 is shown in figure 8.5. As we will see later in the chapter, examining trends
in financial ratios — instead of focusing only on trends calculated on absolute dollar values — is an
important analytical tool as such trends are useful in formulating predictions. For example, the graph
in figure 8.5 depicts that the growth in sales revenue outstrips the growth in EBIT and profit after tax.
This suggests that JB Hi-Fi Ltd’s sales volume and revenue has not increased at a greater rate than the
increase in the operating and financing costs of the business and hence the trend in profits is not as posi-
tive as the trend in sales.
2010 2011 2012 2013 2014 2015Sales revenueEBIT20 Pro t after tax0406080100120140160FIGURE 8.5 Graph of trends in JB Hi-Fi Ltd sales revenue, EBIT and profit after tax for 2010 to 2015