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(2)_Financial_Ratio_Analysis

(2)_Financial_Ratio_Analysis - Lesson plan 17 Module...

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Lesson plan 17 Module: Finance Topic: Financial Ratio Analysis Year: 11 Period: one hour Ability: mixed Aim: help students to understand how profitability ratio analysis helps to assess business profitability. Objectives of the lesson: to understand the meaning of % net profit; to understand the meaning of % of gross profit; to learn how to calculate ratios; to understand how businesses can improve their profitability; to analyse and investigate business actions used to improve their profitability; to appreciate the interdependence of different functional areas in a business. Phase 1 Introduction 5-7 minutes 1. State clearly the objectives of the lesson. 2. Link the new topic to students’ prior learning about how businesses are structured and its functional areas. Phase 2 Development 45-50 minutes Stage 1 how to use ratios 5 minutes The profitability ratio diagram H. Seliet Year 11 lesson plan 21 st Nov 2003 1

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H. Seliet Year 11 lesson plan 21 st Nov 2003 2 Assessing a business profitability Trading account account Gross profit Net profit % gross profit % net profit
How to use ratios in the exam Stage 2 obtaining the data – which account? Activity “Where do I belong?” 7-10 minutes First, individually students are going to carry out this activity, and then have it discussed with by whole class. Stage 3 calculations of ratios % Gross profit and % net profit 1. % Gross profit Remember Sales Revenue – Cost of Sales = Gross profit/loss 1. Look closely at the following formula Gross profit -------------------------- X100 =Gross profit margin Sales revenue/turnover H. Seliet Year 11 lesson plan 21 st Nov 2003 3 Obtaining data –which account? Calculating ratios Interpreting ratios Comparing ratios

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For example, at the end of 2002, Roberts Ltd’s gross profit was £1000 and its sales revenue was £10,000, therefore its % gross profit is 10%. The higher this ratio is the better it is.
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(2)_Financial_Ratio_Analysis - Lesson plan 17 Module...

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