Lesson Plan for Senior Secondary 2 - Financial Accounting - Introduction To Accounting Ratios

**Lesson Plan: Introduction to Accounting Ratios** **Grade Level**: Senior Secondary 2 **Subject**: Financial Accounting **Topic**: Introduction to Accounting Ratios **Duration**: 90 minutes **Objectives**: 1. Understand the concept of accounting ratios. 2. Identify and calculate different types of accounting ratios. 3. Interpret the significance of various accounting ratios in financial analysis. **Materials Needed**: - Whiteboard and markers - Projector and computer - Handouts with example financial statements - Calculator - Worksheets for practice problems --- **Lesson Outline**: **1. Class Introduction (5 minutes)** - Brief greeting and attendance. - Introduce the day’s topic and objectives. **2. Introduction to Accounting Ratios (15 minutes)** - Define accounting ratios. - Explain that accounting ratios are quantitative measures derived from financial statement data. - Discuss why accounting ratios are important. - Use as tools for analyzing a company’s financial performance and condition. - Aid in comparative analysis over different periods and between different companies. **3. Types of Accounting Ratios (15 minutes)** - Liquidity Ratios: - Current Ratio = Current Assets / Current Liabilities - Quick Ratio = (Current Assets - Inventory) / Current Liabilities - Profitability Ratios: - Return on Assets (ROA) = Net Income / Total Assets - Return on Equity (ROE) = Net Income / Shareholder’s Equity - Solvency Ratios: - Debt to Equity Ratio = Total Liabilities / Shareholder’s Equity - Efficiency Ratios: - Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory **4. Calculation and Interpretation (20 minutes)** - Distribute example financial statements handouts. - Demonstration: - Walkthrough calculation of different ratios using the example financial statements. - Group Activity: - Divide students into small groups. - Assign each group to calculate specific ratios from the given financial statements. **5. Class Discussion (15 minutes)** - Ask groups to present their calculated ratios. - Discuss the significance of each calculated ratio in the context of financial performance and health. **6. Real-World Application (10 minutes)** - Present a brief case study of a real company. - Demonstrate how accounting ratios from that company’s financial statements provided insights into its business strategies and decisions. **7. Practice Worksheet (10 minutes)** - Distribute practice worksheets with various questions related to accounting ratios. - Encourage students to solve them individually for reinforcement. **8. Q&A and Recap (10 minutes)** - Open the floor for any questions from students. - Recap the key points discussed: definition and types of accounting ratios, calculation, and their interpretation. - Provide information on further readings or resources. **9. Homework Assignment (5 minutes)** - Assign homework where students gather financial statements of a company of their choice and compute selected accounting ratios. **10. Conclusion** - Summarize the lesson and express the importance of understanding and utilizing accounting ratios in financial analysis. - Thank the students for their active participation. --- **Assessment**: 1. Participation in group activity. 2. Accuracy and completeness of practice worksheet. 3. Quality and comprehension in homework assignments. **Follow-Up**: Review homework in the next class and build on the understanding of accounting ratios by discussing advanced concepts and interpretations.