Types of Expectations
Trend analysis—analyze changes in accounts of a
company over time
Ratio analysis – compare relationships between two
or more financial statement accounts or comparisons
of account balances to nonfinancial data
• Liquidity (e.g., current ratio)
• Leverage (e.g., debt to equity)
• Profitability (e.g., gross profit percentage)
• Activity (e.g., inventory turnover)