Lesson Plan Overview / Details
This lesson is designed to teach students how to use a mathematical model based on
financial ratios to assess the financial health of a company.
Reading Between the Lines
- One Class Period
- 75 Minutes
California Career and Technical Education Standards
- FB.A.A1.4 Prepare, analyze, and interpret financial statements for various businessentities.
- FB.FS.5.1 Apply appropriate problem-solving strategies and critical thinking skills to wor...
California Academic Content Standards (Reinforced)
- ELA.11-12.R.CAGT.2.3 Verify and clarify facts presented in other types of expository texts by using a...2
- ELA.9-10.R.CAGT.2.3 Generate relevant questions about readings on issues that can be researched.2
- ELA.9-10.R.CAGT.2.5 Extend ideas presented in primary or secondary sources through original analysis...3
- M.6.NS.1.2 Interpret and use ratios in different contexts (e.g., batting averages, miles pe...1
- M.7.AF.1.5 Represent quantitative relationships graphically and interpret the meaning of a ...31
- M.7.NS.1.3 Convert fractions to decimals and percents and use these representations in esti...24
- M.7.NS.1.6 Calculate the percentage of increases and decreases of a quantity.11
- M.7.NS.1.7 Solve problems that involve discounts, markups, commissions, and profit and comp...22
Student Objectives / Goals
- Students will understand the purpose of specific financial ratios and interpret the meaning of calculated ratios.
- Students will calculate financial ratios using an income statement and a balance sheet
- Students will assess the financial condition of a company using financial ratios and apply a process to rank the financial health.
- Students will work on problem- solving strategies and think about what needs to happen to improve the financial health.
Activities in this Lesson
- Bad Advice - Hooks / Set
As students walk in they will pick up the Reading Overview and answer the question on the first slide of the PowerPoint on the back of their paper.
What do you think is the “financial health” of a company? Write down what you know as of right now on the back of your paper.
Show the clip ( Financial Advice ).
Beware of who is giving you advice, you need to be the expert!
- Whisper Read - Group Work
Have students begin by pair share reading the Overview Reading explaining public companies and financial statements. Have students set the chairs back to back, one reads and one highlights – changing each job after each paragraph. See PowerPoint slide 3 for an example. Give 15 minutes for reading activity.
Discuss the terms (PowerPoint Slide #4) from the reading. Have each pair share with the class a term or terms using a sentence they create.
- Real Life Example - Demo / Modeling
Use a real life example to explain profit margin and debt ratio. This will help students understand the importance of the percentage and how it relates to their own financial position. See PowerPoint Slide 6 for an example.
Your first paycheck example.•Profit Margin - You just received your paycheck it was $100.00 and after you paid gas and food you have $25.00 left. The $25.00 is your profit, this is divided by your paycheck, your profit margin is 25%! What happens if your expenses are $80.00!•Debt Ratio- You just bought a car and your loan is $1,000. You also own your own furniture worth $5000 and have some cash in the bank $500. Your current debt ratio is 1000/5500 or 18%! What happens if the car loan was $3,000!!
- The Fav 5 - Demo / Modeling
Together work through the 5 financial ratios as shown on the Fav 5 Sheet - show the first example on the board, discuss the answer after each ratio and have students show their answers first. You can use paper inserted into plastic sheet covers and dry erase markers if you do not have white boards or clickers. Explain to the students we are using a sample company, Metro One Sportswear.
- Scoring Metro One Sportswear - Demo / Modeling
Students will look at the Metro One Sportswear points based on the Scoring Table to see the score for the company. What is the health of Metro One? What would be a change that would improve their score? Using ratios and a scoring rubric is a valuable way to evaluate business performance!
- Scoring Table [ Download ]
- Your on Your Own - Lab / Shop
Find an actual annual report of an existing publicly traded company. The internet could be used fo this purpose.Visit the site annualreportservice.com and setup one account for the class to use or use annual reports downloaded previously. I attached 4 samples, Wal-mart, Google, Footlocker and Apple.
Use the 5 financial ratio formulas to calculate the financial health of the company. Students will use the Financial Planner Worksheet to input their 5 ratios.
- Assessment Types:
- Writing Samples,
Students will use the back of their Financial Planner Worksheet to write a paragraph based on facts and the results explaining to stockholders the financial health of this company. Use the ratios (as percents) to explain the health.
- PowerPoint [ Download ] Slides for this Lesson