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Level 4 Diploma in Business Management

Calculating financial ratios from a set of business accounts

BM404 · Finance and Accounting — Week 10 of 16

CourseBM404
Week10 of 16
SemesterII
TutorOnline in the course chat

This week’s topics

Calculating financial ratios from a set of business accounts

  1. Starting point: percentages, ratios and percentage change
  2. Profitability ratios
  3. Liquidity ratios
  4. Solvency ratios
  5. Valuation ratios

What you will be able to do

  • 3.1 Calculate financial ratios from a set of business accounts.

Activity

Start with this week’s 4 videos, then discuss how they apply to this week’s topic and note one example from a real business.

Study materials

Videos

  • Checking and securing understanding of converting between ratios, percentages and fractions · Oak National Academy, Key Stage 4 (GCSE level) · for registered students
  • Checking and securing understanding of sharing in a ratio · Oak National Academy, Key Stage 4 (GCSE level) · for registered students
  • Finding the percentage change · Oak National Academy, Key Stage 3 (lower secondary level) · for registered students
  • Finding a percentage with a multiplier · Oak National Academy, Key Stage 3 (lower secondary level) · for registered students

Further resources

  • Prealgebra 2e, ch. 6.2–6.3: Percent applications, including increase and decrease · PDF · OpenStax (2020), sections 6.2–6.3 on percentage increase/decrease, commission and discount; pp. 482–506 · for registered students
  • Contemporary Mathematics, ch. 5.4: Ratios and proportions (incl. currency conversion) · PDF · OpenStax (2023), section 5.4 on ratios, proportions and converting between currencies such as dollars and euros; pp. 366–375 · for registered students
  • Principles of Finance 2e, ch. 6.3 and 6.6: Liquidity and profitability ratios · PDF · OpenStax (2026), sections 6.3–6.6 on current and quick ratios, margins and returns, with worked figures; pp. 168–181 · for registered students
  • Introduction to Business 2e, ch. 14.7: Analysing financial statements · PDF · OpenStax (2026), section 14.7, a gentler overview of liquidity, profitability and other ratios; pp. 492–495 · for registered students
  • Monitoring, Supervision and the Use of Accounting Ratios in Irish Credit Unions · Open-access article · Hyndman & McKillop (2006), Irish Accounting Review. Real example of a ratio scheme (PEARLS) used to judge liquidity, profitability and safety. · for registered students
Materials marked “for registered students” open in the student portal, which is set up as soon as you receive final acceptance.
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Course plan
  • Week 1: What finance and accounting are for: branches of accounting…
  • Week 2: Rules and laws that shape finance and accounting
  • Week 3: How finance and accounting support business decisions
  • Week 4: Different financial statements and what each one shows
  • Week 5: Preparing financial statements for a sole trader
  • Week 6: Preparing financial statements for a partnership
  • Week 7: Adjustments to financial statements: accruals, prepayments …
  • Week 8: Midterm evaluation
  • Week 9: Adjustments to financial statements: depreciation and debt …
  • Week 10: Calculating financial ratios from a set of business accounts
  • Week 11: Comparing organisational performance using historical finan…
  • Week 12: Types of budget: operating, cash, fixed and master budgets
  • Week 13: Budgeting approaches: incremental, activity-based, value pr…
  • Week 14: Preparing different types of budgets
  • Week 15: Review and coursework completion
  • Week 16: Final evaluation and project assessment
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