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CMA Intermediate · Financial Management and Business Data Analytics · Comparative, Common-Size Financial Statements and Trend Analysis

Sales of Mehta Foods Ltd. have trend indices (base Year 1 = 100) of 100, 120, 150 and 135 for Years 1 to 4. Year 1 sales were Rs 50 lakh. By what percentage did sales change from Year 3 to Year 4, and what are Year 4 sales?

Sales fell by 10 percent to Rs 67.5 lakh. Year 4 sales are 135 percent of Rs 50 lakh, while Year 3 was Rs 75 lakh. The 15-point index drop is measured against 150, not 100, giving 10 percent.

  1. ADecrease of 15%; Rs 67.5 lakh
  2. BDecrease of 10%; Rs 67.5 lakhCorrect
  3. CDecrease of 10%; Rs 75 lakh
  4. DDecrease of 15%; Rs 75 lakh

Explanation

Year 4 sales = 50 x 1.35 = Rs 67.5 lakh. Year 3 sales = 50 x 1.5 = Rs 75 lakh. Change = (67.5-75)/75 = -10%. The 15-point fall in the index is not a 15% fall, since the correct base is Year 3's index of 150 (15/150 = 10%).

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