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Using Financial Records

Suggested Timeframe: 1-2 hours

Goal

To help students become familiar with the various financial information and use of this information to run a successful business.

Activities

Activity 1 Using Analysis

Discuss the principles of ratio analysis with the class and the advantages of using it compared with the direct analysis of financial records, citing the different ratios that can be used as key performance indicators.

Once the class has been familiarised with the concept, ask them to apply the examples of different ratios shown in the student handout to the financial records for A.King in the student worksheet.

Activity 2 Financial Report

For further analysis, have students go online and find real final accounts and balance sheets they can perform ratio analyses on before reporting back to class on their analysis of that company’s health. If they struggle for ideas, suggest a quick Google search for "McDonald’s balance sheet" or "Telecom annual report".

Activity 1 Answers

Gross profit ratio 60%
Net profit ratio 27%
Return on capital employed (ROCE) 13.72%
Current ratio 19.6 : 1
Acid test ratio 18.1 : 1
Rate of stock turnover 91.25 days
Asset turnover $0.50 per asset
Last updated 11 November 2016