[PDF] Accounting Ratios

1675_6C078.pdf

Award Scheme on Instructional Design

Accounting Ratios

Accounting Subject

For Form 5 Students

Registration Code: C078

2015/2016

C078 1

A. Introduction

The school offer students the choice of the Commerce Stream from Form 4 onwards. Students in the Commerce Stream will learn 4 commercial subjects Accounting,

Economics, Commerce and English for Business.

The master syllabus of the Accounting subject is based on two public examinations LCCI Accounting and Edexcel IGCSE Accounting. Students will be equipped to attempt different levels of the two examinations. Students in Form 4 level learn the basics of Accounting. Most of the work are mechanical procedures and students are able to get good result as long as they make an effort in class and homework. In the Form 5 level, students have to use what they have learnt to bring it to another level. They have to understand apply the concepts behind those mechanical procedures and use their judgement to decide what accounting treatment is proper. In this chosen topic, students have to take another perspective of the subject. Instead of preparing an account or statement, they have to do analysis of the statement. This requires a solid understanding in the output of accounting and a critical mind. The lesson starts from letting students feel the usefulness of the topic and thus develop a need to learn it. Then the two main parts follow: ratio calculation and ratio analysis. The lesson plan focus on allowing students to explore. Students are extensively guided, rather than taught.

2015/2016

C078 2

B. Table of Contents

A. Introduction .......................................................................................................... 1

B. Table of Contents ............................................................................................... 2

C. Teaching Schedule................................................................................................ 3

1. Learning Objectives.............................................................................................. 4

1.1 Cognitive Domain .................................................................................................. 4

1.2 Psychomotor Domain............................................................................................. 4

1.3 Affective Domain................................................................................................... 5

2. Main Content ........................................................................................................ 6

3. Creativity and Characteristics of the Design ........................................................ 6

4. Teaching Focus ..................................................................................................... 7

5. Difficult points...................................................................................................... 7

6. Teaching Aids ....................................................................................................... 7

7. Lesson Plans ......................................................................................................... 8

8. Evaluation ........................................................................................................... 19

8.1 Lesson Execution ................................................................................................. 19

8.2 Accomplishment of Learning Objectives ............................................................ 21

9. Reflection on Teaching....................................................................................... 23

10. Recommendations .............................................................................................. 23

11. Appendix ............................................................................................................ 24

11.1 Quiz on Formula of Accounting Ratios ............................................................... 24

11.2 Sample Questions for Homework and Class Practices ........................................ 25

11.3 Sample Question for Test ..................................................................................... 28

2015/2016

C078 3

C. Teaching Schedule

9 March 2016 Period 1 - 2:

9 Introduction to accounting ratios

9 Usefulness of ratio analysis

9 Introduction and explanation of different accounting ratios

9 Classification of accounting ratios according to their types and uses.

11 March 2016 Period 3 - 4:

9 Demonstration question on calculation of ratios

9 Analysis of performance using accounting ratios

9 Limitations of ratio analysis

15 March 2016 Period 5 - 6:

9 Quiz on formula of accounting ratios

9 Group challenge on ratio analysis

9 Demonstration on forecast income statements

30 April 2016 Period 7 - 8:

9 Test and test corrections

2015/2016

C078 4

1. Learning Objectives

1.1 Cognitive Domain

At the end of the chapter, students are able to:

9 Explain the importance and uses of accounting ratios.

9 Explain the meaning and implication of different accounting ratios.

9 Explain the different types of account ratios: profitability, liquidity and

management efficiency and their use.

9 Understand how comparison is made using accounting ratios.

9 Explain the limitations of accounting ratios.

1.2 Psychomotor Domain

Students should be equipped to tackle questions from public exams, including Edexcel IGCSE Accounting, LCCI 2nd Level Accounting. Students should be able to do the following:

9 Calculate different accounting ratios for measuring profitability, liquidity and

management efficiency:

¾ Gross profit mark-up

¾ Gross profit percentage (margin)

¾ Net profit percentage (margin)

¾ Return on capital employed

¾ Current ratio

¾ Acid test ratio

¾ Inventory turnover rate (or period)

¾ Debtors collection period (or rate)

¾ Creditors settlement period (or rate)

9 Do analysis on performance using accounting ratios

9 Prepare forecast income statement from accounting ratios given

2015/2016

C078 5

1.3 Affective Domain

Students should develop awareness on the importance and usefulness of accounting. Accounting ratios help different stakeholders to make decisions. And such ratios have to be based on accounting information provided by book-keeping. Without standardized accounting and accounting ratios, meaningful comparison is not possible. Thus, doing business and investments of any kind will become much more risky. Students should also develop a skeptical mind about the use of accounting ratios and information. Students will be shown how to easily manipulate results to affect decision making. They should also be conscious about the importance of being an honest person and be ethically intact in the business world.

2015/2016

C078 6

2. Main Content

The chapter will be executed by:

9

9 Classification activity;

9 Demonstration questions;

9 Analysis of accounting ratios in groups;

9 Class discussion;

9 Homework on various question types;

9 Quiz on formula of accounting ratios;

9 Test on calculation and analysis of accounting ratios.

3. Creativity and Characteristics of the Design

https://www.google.com/imgres?imgurl=http%3A%2F%2Fimg3.house365.com%2Fnj homenews%2F2012%2F09%2F05%2F13468112355046b563e5f31.jpg&imgrefurl=htt p%3A%2F%2Fhome.house365.com%2Fhtml%2F2012%2F11%2F05%2F021291213_all .html&docid=Eyx85a_H4rwjsM&tbnid=gO4xn-jejY7VIM%3A&vet=1&w=500&h=334& bih=727&biw=1024&ved=0ahUKEwiQp-_xr6_SAhXMkpQKHXMMBDsQxiAIGSgF&iact =c&ictx=1 Lessons and activities are planned to be more student interest on the topic.

Lead in

In the past few years, the Business Club of the school open a stall in the flea market in Tak Sac before Chinese New Year. The income statement of two years are used to

Classification activity

is very abstract to them. Students will be required to explore the topic by thinking how to analyze the performance of a business. With the knowledge constructed bit by bit by students themselves, it is hoped that they will have a deeper impression and more thorough understanding of the topic.

2015/2016

C078 7

4. Teaching Focus

There are two foci in this topic, accounting ratio and ratio analysis. Students should be able to accurately calculate the ratios from financial statements or fragment information, with the need to deduce missing figures. Such calculations should be shown in proper presentation. The ratio analysis is much more difficult to teach. Students should be equipped with the ability to state and explain whether the business performed well. The emphasis should be on the link between different ratios. Care should be taken that explanation should not contradict each other. In this level they will learn to work with basic ratios. This lays the foundation for the more difficult level in the next year. Students should be prepared to deal with higher quality analysis.

5. Difficult points

Students usually encounter the following difficulties when learning the topic:

9 There are many accounting ratios, students may mix up different formula.

9 There are also different versions of the formula for one some accounting ratios,

students have to decide which version is proper in the situation given.

9 Students may misinterpret the data given in the financial statements.

9 It is not easy for students to find the relationship between different ratios and its

implication.

6. Teaching Aids

The following materials are needed during lessons:

9 Income Statement for the flea market

9 Worksheets for demonstration questions

9 Financial statements of companies in Macau

9 Video clips of financial news

9 Worksheets for group work

9 Worksheet for homework, quiz and test

2015/2016

C078 8

7. Lesson Plans

General information about the lesson plans:

Class F5B

No of students 27

Time 40 mins per period (80 mins per double period)

Previous

knowledge

9 Financial Statements including Income Statement and

Statement of Financial Position

Timing 9 March 2016 Period 1 - 2:

Topic 9 Introduction to accounting ratios

9 Usefulness of ratio analysis

9 Introduction and explanation of different accounting ratios

Objectives 9 Explain the importance and uses of accounting ratios.

9 Explain the meaning and implication of the following

accounting ratios:

¾ Gross profit mark-up

¾ Gross profit percentage (margin)

¾ Net profit percentage (margin)

¾ Return on capital employed

¾ Current ratio

¾ Acid test ratio

¾ Inventory turnover rate (or period)

¾ Debtors collection period (or rate)

¾ Creditors settlement period (or rate)

Method

80 minutes

Lead in:

9 The Business Club of the school open a stall in the flea market

Sac Square before

Chinese New Year in these few years.

9 Show students the Income Statement of Starry Horse (2014)

and Fortune Snake (2013).

2015/2016

C078 9

9 Ask students which company has a better performance.

9 Usually students will choose the company with a higher net

profit (Starry Horse).

9 Let students read these two income statement, where only net

profits are shown but other parts covered.

9 Ask students which company performs better.

9

9 Ask students why other figures matter.

9 Guide students to think about the scale of the company.

9 Reveal the covered parts of the income statement.

2015/2016

C078 10

9 Ask students now which company performs better.

9 Usually they will compare the revenue and net profit. Give

them the concept of accounting ratio and tell them when net

9 Show the financial statement again of Starry Horse and Fortune

Snake again and ask students to calculate the net profit margin for the two companies and suggest which company performed better in this respect.

9 Ask students to give reasons why the Starry Horse has a higher

net profit. 9 the scale, source of revenue, location, etc.

9 Students should be able to name the following differences:

Starry Horse Fortune Snake

Location Tap Sak Square

Wharf

Capital Mop 60,000 Mop 20,000

Source of revenue Sale of product,

lucky draw

Games, sale of

product

9 Ask students to suggest how to evaluate the performance of the

companies when the scale is not the same.

9 look at

the ratios rather than just the figures.

2015/2016

C078 11 Lesson Development:

9 Introduce the different accounting ratios and their formula:

Gross profit mark-up ܩݎ݋ݏݏ ܲ

ܥ݋ݏݐ ݋݂ ܽܵ

Gross profit percentage

(margin)

ܩݎ݋ݏݏ ܲ

ܴ

Net profit percentage

(margin)

ܰ݁ݐ ܲ

ܴ

Return on capital

employed

ܶܫܤܲ

ܽܥ݌݅ݐ݈ܽ ܧ

Current ratio ܥݑݎݎ݁݊ݐ ܣ

ܥݑݎݎ݁݊ݐ ܮܾ݅ܽ

Acid test ratio ܥݑݎݎ݁݊ݐ ܣ

݁ݔ݈ܿݑ݀݅݊݃ ܫ

ܥݑݎݎ݁݊ݐ ܮܾ݅ܽ

Inventory turnover rate

Inventory turnover period

ܥ݋ݏݐ ݋݂ ܽܵ

ܣݒ݁ݎܽ݃݁ ܫ

ܣݒ݁ݎܽ݃݁ ܫ

ܥ݋ݏݐ ݋݂ ܽܵ

ൈͳ- ‘-Š• (or in weeks or days)

Debtors collection period

Debtors turnover rate

ܦܾ݁

ܥݎ݁݀݅ݐ ܽܵ

(or in weeks or days)

ܥݎ݁݀݅ݐ ܽܵ

ܦܾ݁

Creditors settlement

period

Creditors turnover rate

ܥ

ܥݎ݁݀݅ݐ ܲݑݎ݄ܿܽ

ൈͳ- ‘-Š• (or in weeks or days)

ܥݎ݁݀݅ݐ ܲݑݎ݄ܿܽ

ܥ

2015/2016

C078 12

9 Explain the use of each ratio by looking at its components.

9 After the teacher explain some ratios, allow students to try

explaining them to others.

9 Ask students to copy the formula of each ratio and leave some

space to write the explanation later.

9 Give students 2 minutes to go through all the ratios again.

Consolidation:

9 Quick recap exercise.

9 Show the formula on screen and ask student to name the ratio or

vice versa.

Conclusion:

9 Ask students to review all the ratios at home.

9 Ask students to arrange their notebook and write some

explanation next to the formula.

9 Give a brief idea of what will be taught in the next lesson.

Assignment 9 Arrangement of notebook

Resources 9 Income Statement of Starry Horse and Fortune Snake

9 Powerpoint file for presentation

2015/2016

C078 13

Timing 11 March 2016 Period 3 - 4:

Topic 9 Demonstration question on calculation of ratios

9 Classification of accounting ratios according to their types and

uses.

9 Analysis of performance using accounting ratios

9 Limitations of ratio analysis

Objectives 9 Calculate different accounting ratios with proper presentation

9 Explain the different types of account ratios: profitability,

liquidity and management efficiency and their use.

9 Understand how comparison is made using accounting ratios

9 Do analysis on performance using accounting ratios

Method

80 minutes

Lead in:

9 Recap on the ratios learnt in the last lesson.

9 Distribute to students the worksheets for demonstration

question. (requirement: ratios for two companies)

9 Ask students to read the requirements and see if there is any

ratio that they do not know.

Lesson Development:

Ratio Calculation

9 Write the suggested format of ratio calculation on the board

and explain the general requirements some reminders, as follows:

Item Ratio Formula Workings Answer

(i) Adapted to the question Corrected to

2 d.p. if not

instructed; show the proper unit Repeat these two columns for the second company (or year)

9 Guide students to work out the answers of the first 4 items

together.

9 Ask students to work out by themselves the answers of the

remaining items and show them on the board.

9 Check the answers with students and point out their mistakes.

9 Clarify if students have any doubt.

2015/2016

C078 14

Ratio Analysis

9 Ask students to go into groups of 4.

9 Ask students which company perform better according to the

ratios calculated.

9 Let students share their opinion but do not give any comments

yet. Let 5 or 6 students speak in this section.

9 Students answer will generally repeat the point of profitability.

9 Explain that the performance of a company includes more

than its performance on profit making.

9 Show students that there are three category of ratios:

profitability, liquidity and management efficiency.

9 - the ability

of the company to make profit. 9

9

- the ability to turn current assets into liquid assets (cash). 9 to but leave them wondering.

9 Ask students to go to their group and try to classify the 9

ratios learnt into the 3 categories.

9 Show the 9 ratios on the screen. Invite a student show the

result of their discussion on classification.

9 The proper classification is as follows:

9 Ask students from 2 groups to suggest again what

9

Profitability Gross profit mark-up

Gross profit percentage (margin)

Net profit percentage (margin)

Return on capital employed

Liquidity Current ratio

Acid test ratio

Management

Efficiency

Inventory turnover rate (or period)

Debtors collection period (or rate)

Creditors settlement period (or rate)

2015/2016

C078 15 how well the company manage its inventory, debt collection and repayment. Thus, affecting profitability and liquidity in return.

9 Explain to student that ratio analysis on performance of the

company should be divided into these 3 categories.

9 Now let students suggest the performance of the company

according to these categories. 9

Consolidation:

9 Explain the requirement for proper ratio analysis presentation

(ratio used, ratio briefly explained, ratio quoted, applied and explained).

9 Use the answer suggested by students to write the answer on

board accordingly, showing the proper way to explain.

9 Ask students the problems on evaluating the performance of a

company using accounting ratios.

9 Read the textbook on limitations of ratio analysis

9 Guide students and explain each point briefly.

9 Ask them to copy the limitations on their notebooks at home.

Conclusion:

9 Ask students to find relationship between the ratios of the

three categories.

9 Ask students to bring this question home and contemplate on

it.

9 Assign homework on ratio calculation.

9 Announce the formula quiz in the next lesson.

9 Give a brief idea of what will be discussed in the next lesson.

Assignment 9 Homework on ratio calculation

9 Arrangement of notebook

Resources 9 Worksheets for demonstration question

9 Powerpoint file for the classification activity

9 Textbook

9 Worksheets for homework

2015/2016

C078 16

Timing 17 March 2016 Period 5 - 6:

Topic 9 Quiz on formula of accounting ratios

9 Group challenge on ratio analysis

9 Demonstration on forecast income statement

Objectives 9 Explain the limitations of accounting ratios

9 Prepare forecast income statement from accounting ratios

given

Methods

Quiz

10 minutes

9 Quiz on formula of the ratios learnt and their corresponding

categories

9 Briefly check with students (especially the category part)

9 Remind students of the common mistakes

Method

Group

challenge

55 minutes

Lead in:

9 Divide students into groups of 4.

9 Name two public companies and ask students if they know

them.

9 Ask students to suggest which company perform better from

their impression.

9 Give students the simplified financials statements of the two

companies.

9 Explain the requirements of the group challenge, as follows:

¾ You are an assistant of a very rich person wanting to invest

¾ Evaluate which company performs better

¾ Calculate ratios for this purpose

¾ Advise the rich person on the choice of investment

Lesson Development:

9 Give students 15 minutes to calculate the ratios

9 Collect and mark the papers on the calculation

9 Show the correct answers on the screen

9 Ask students another 15 minutes to do the analysis and jot

down the points.

9 Suggest students to pay special attention to the relationship

between the different categories of ratios.

9 After the discussion, each group take turns to present their

points. It should go on for at least two rounds.

9 Answers are put on the screen in point forms.

9 After all groups finishes, students will be asked to point out

contradicting points.

2015/2016

C078 17

9 Students will be asked to resolve the contradicting points.

9 A further round will be held and the groups explain the

relationship between different categories of ratios.

9 answers.

Consolidation:

9 Ask students to look at all the points on the screen again.

9 Ask students to pick the most important and convincing points

if a summary of analysis is needed rather than a very detailed one.

9 When the points are agreed, ask students to write them down

on the notebook.

Conclusion:

9 Read the answer of a student from her notebook.

9 Rebut her points using the limitations of ratio analysis taught

last lesson. Remind students to think about the limitations as well and do not be so a

9 Mention that there are more things to consider when making

investment decision. Briefly introduce what will be learnt in the next year about advanced ratio analysis on investment decision.

9 Assign homework on ratio calculation and analysis.

9 Announce the test in the next week and its syllabus.

Method

Forecast

income statement

15 minutes

Lesson Development:

9 Distribute the students the worksheets on forecast income

statement.

9 Let students read the question.

9 Draw the forecast income statement on the board.

9 Put a star on the difficult item (cost of sales) on the income

statement.

9 Write the working and the answer of that item on the board

(cost of sales is to be calculated taking into account the change in sales volume and change in purchase price, and deduce the value of purchases).

9 Ask students to try to work out the other parts of the statement

by themselves.

9 Check the answer together.

2015/2016

C078 18 Conclusion:

9 Explain the reason behind such calculation method for the

difficult item.

9 Remind students on common mistakes (students usually

calculate the purchases figure first).

9 Assign homework on forecast income statement.

Assignment 9 Homework on ratio calculation and analysis

9 Homework on forecast income statement

9 Arrangement of notebook

9 Corrections on quiz

Resources 9 Worksheets for quiz

9 Worksheets for group challenge (simplified financial

statements of real corporations)

9 Worksheets for homework on ratio calculation and analysis

9 Worksheets for homework on forecast income statement

Timing 30 March 2016 Period 7 - 8 (after one week)

Topic 9 Test and test corrections.

Objective 9 Students are able to apply what they have learnt about accounting ratio analysis. Method 9 Give students a 45-minute test on accounting ratios (extracted and adapted from LCCI past papers).

9 Do corrections together and point out areas of common

mistakes. Consolidation 9 Make a final conclusion on the topic. Assignment 9 Ask students to do proper corrections for the test.

Resources 9 Test papers;

9 Powerpoint file for answer key.

2015/2016

C078 19

8. Evaluation

8.1 Lesson Execution

Period 1 2

The choice of using the income statement of the flea market organized by the Business Club is great. Students are very interested in commenting of the performance of the previous years. The Business Club is a very popular club among the students in the commerce stream. At the time of the lesson, the Chinese New Year has just ended a short time. The club is finalizing its financial statements and deciding how much they should pay the investors as dividends. As a result, this part successfully arouse the interest of students. They also realize from the start that the technique learnt in this topic can help them in daily issues. In the next part, students have to learn 9 ratios. This part is very heavy for them as they have to remember the formula as well as understanding why they mean and how to apply. Some of the students start to fall behind and show confused faces. Better planning has to be made in the future to introduce these ratios to students.

Period 3 4

This lesson is very practical. Students have to learn how to calculate the ratios and show them in proper format. Students in this class can work quite fast when it comes to calculation, if they are given clear instructions. Recap is made for each item after the calculation. Students can strengthen their understanding of the ratios in this part. In the classification activity, most groups can classify the ratios correctly. However, ng at the ratios included, they find it hard to give good conclusion. After the classification activity, instructions is given on how ratio analysis is made. Students can follow well how to make such analysis. However, when discussion is made on advanced level analysis, students commented that they can understand what is being talked about but would be difficult if they have to make such analysis themselves.

2015/2016

C078 20

Period 5 6

The result of the formula quiz is satisfactory (highest: 100, lowest: 63, average: 87). Students should be familiar with the formula of the ratios by then. Students in this class care a lot about marks. Giving a quiz is a good way to consolidate their knowledge and urging them to study early. The group challenge part is very exciting for the students. They are only given very limited time to finish the calculation. Most of the groups can get the correct answers as they are working together and can help to check the answer and spot any mistake immediately. This is a part to build their confidence as they know they can handle this part well. In the analysis part, students find it quite difficult to find valid points. Most of the answer remain in the elementary level of ratio analysis. Nevertheless, they are quite enthusiastic in opting to give the answers as they know they will have less points to mention if they are not quick enough. In the last part, they have to find the link between the different ratios. Students are not able to give very good answers to this. Much guidance is needed to finish this part, making less time left for the forecast income statement part. More time should be allowed as they have to really discuss to discover the relationship between the ratios. Students in this class are very curious. They like to take part in class discussion and group work. Group discussions are frequently used in this class to enhance their learning. Students are also very interested in dealing with the financial statements of real companies. In the forecast income statement part, students do not have enough time to explore and consider how to calculate. The most difficult item has to be taught. That is why students do not perform very well in this question type during the test.

Period 7 8

The result of the test corresponds to expectation (highest: 96, lowest: 45, average: 73). Test correction is done right after the test so that students can notice their mistakes and correct any misconception immediately. From the test, the following common mistakes are founded:

9 Capital employed taken as capital only

9 Mix up on interest before/after interest

9 Do not following the requirements of a proper ratio analysis

9 Do not know how to calculate the cost of sales for the forecast income statement

2015/2016

C078 21

8.2 Accomplishment of Learning Objectives

Accomplishment of learning objectives is assessed according to:

9 Notes made in the notebook;

9 Quality of the answers in homework, class practices, quizzes, tests and exams;

9 Quality of class discussions and responses.

Cognitive objectives

From the results of homework, class practices, quizzes, tests and exams, it can be seen the most students are able to understand and apply the concepts. In the ratio analysis part, students can understand the individual ratios. However, they are not very good at spotting the link between them.

Objectives Level of accomplishment

(5-Excellent, 1-poor)

9 Explain the importance and uses of accounting

ratios. 4

9 Explain the meaning and implication of different

accounting ratios. 4

9 Explain the different types of account ratios:

profitability, liquidity and management efficiency and their use. 4

9 Understand how comparison is made using

accounting ratios. 4

9 Explain the limitations of accounting ratios. 5

2015/2016

C078 22

Psychomotor objectives

Most students can handle the calculation part very well. They get themselves very familiar with the formula in the quiz and can apply those formula quite well. The only difficulty on this part is they need to be more careful on the item of return on capital employed. As the ratio has different version according to what is give in the question, students have to make judgement and apply accordingly. Some students do not follow the requirements of proper ratio analysis. They try to give the answer in their own way. When they do that, they miss the important points and do not allow them to score the full mark. Nevertheless, overall speaking, students can handle this part with the answers being up to standard.

Objectives Level of accomplishment

(5-Excellent, 1-poor)

9 Calculate different accounting ratios for measuring

profitability, liquidity and management efficiency:

¾ Gross profit mark-up

¾ Gross profit percentage (margin)

¾ Net profit percentage (margin)

¾ Return on capital employed

¾ Current ratio

¾ Acid test ratio

¾ Inventory turnover rate (or period)

¾ Debtors collection period (or rate)

¾ Creditors settlement period (or rate)

5

9 Do analysis on performance using accounting ratios 3

9 Prepare forecast income statement from accounting

ratios given 3

Affective objectives

Students realize from the first lesson that ratio analysis is very practical and can be used in their daily life. They also realize that if they do not know it, their ability to read and understand financial statements will be very limited, or even misleading. Students are also given ideas how to manipulate accounting information to affect decision. Although they do not yet possess very skeptical mind, they start to question the implication of the ratios and only use those ratios as reference. Therefore, the objectives in this aspect is largely fulfilled.

2015/2016

C078 23

9. Reflection on Teaching

Overall speaking, lessons on the topic are conducted in a satisfactory manner.

Areas that contribute to the success include:

9 The flow the lessons are planned in a logical way, starting from easy to difficult.

9 Quiz on formula is given to students to make sure students are familiar with the

formula and this save time on the group challenge part.

9 Group discussion is frequently use to foster peer learning.

9 Real life financial statements are used to arouse interest from the start of the

lesson.

9 Students in this class are very curious and like to explore on the topic.

9 Students in the class are not afraid of taking challenges. This lessons are planned

to utilize this characteristic of the students.

9 Students have solid knowledge and confidence in this subject.

9 The teacher has good relationship with students. Mutual trust enable the smooth

execution of lessons.

Areas that need improvement include:

9 Better planning is needed when the ratios are introduced. Activities can be planned

in the future year.

9 The syllabus of the whole year is huge and there is not enough time allocated to

each topic.

10. Recommendation

The following are measures recommended regarding learning and teaching:

9 More time is needed in the part of forecast income statement.

9 More guidance should be given in the analysis part, especially have students have

to find the relationship between the ratios.

9 Discussion time of the returned homework should be prolonged so that students

learn better from their homework.

2015/2016

C078 24

11. Appendix

11.1 Quiz on Formula of Accounting Ratios

2015/2016

C078 25

11.2 Sample Questions for Homework and Class Practices

2015/2016

C078 26

2015/2016

C078 27

2015/2016

C078 28

11.3 Sample Question for Test

2015/2016

C078 29

REQUIRED:

(a) State the formula and calculate the following ratios for Jaycee Ltd and Aybee Ltd to TWO decimal places: (54%) (i) Gross profit mark up (ii) Net profit margin (before interest) (iii) Stock turnover (times per year) (iv) Working capital ratio (v) Acid test ratio (vi) Return on capital employed (vii) (viii) (ix) Sales to capital employed (as a percentage) (b) Comment on which business was the most profitable in 2013, giving two reasons to support your answer. (10%) (c) State two limitations of ratio analysis. (8%) The directors of Jaycee Ltd were planning the budget for 2014 and have made the following forecasts: (1) Sales volume would increase by 5% while selling prices would decrease by 2%. (2) Gross profit mark up would remain unchanged. (3) Closing inventory would increase by £5,000. (4) General expense would increase by 4%. (5) A further £15,000 8% debentures would be issued on 1 July 2014.

REQUIRED:

(d) Prepare the forecast income statement of Jaycee Ltd for the year ending 31

December 2014. (28%)