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".
Resources
- Ratio and KPI performance (for the Business.govt.nz Ratio and KPI Performance interactive tool)
- Templates and calculators (for the Business.govt.nz ratio analysis template)
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 |
