Your question is Compare Variance and Trend Analysis. Take a moment with it on the right.
Talk me through your thinking if you like. When you're confident, submit your answer and I'll grade it like a real screen (7/10 or better passes).
You are reviewing monthly results for a mid-sized financial services business that reports under US GAAP. Your CFO says the team keeps mixing up variance analysis and trend analysis in the monthly close deck, and wants a clear read on what the numbers say about performance. You have three months of actuals and the prior-year benchmark, and you need to explain which analysis is more useful for identifying the root cause of the change.
| Metric | Jan | Feb | Mar | Prior-Year Mar |
|---|---|---|---|---|
| Revenue | 10,000,000 | 10,600,000 | 10,200,000 | 9,500,000 |
| Operating expenses | 6,400,000 | 6,700,000 | 6,900,000 | 6,100,000 |
| Headcount | 420 | 430 | 445 | 405 |
| Client assets under management | 48,000,000,000 | 49,200,000,000 | 50,100,000,000 | 44,800,000,000 |
How would you distinguish variance analysis from trend analysis using these figures, and what would each method tell you about the business performance in March?
