Explain the difference between cross-sectional and time series analysis.

- Cross-sectional analysis entails comparing a corporation's financial statements to its primary competitors and industry averages.

- Time series (or trend) analysis involves comparisons of the current year to previous years.

- Differences may exist in the size of two corporations or even in the same corporation from year to year (perhaps due to the acquisition of another corporation). Analysts address this problem by restating the financial statements in percentage terms.