Introduction

A ratio shows the relationship in quantity, amount, or size between two or more things. A ratio analysis is a tool used by a business to evaluate their financial statements and to  help with making business decisions. 

 

Profitability ratios are used to figure out a company’s ability to generate profit (very important if someone is thinking about buying an established business). You will need to know that the key terms “gross profit margin”, “profit margin”, and “ROCE” are calculations you can use to determine a company’s profitability.

 

Liquidity ratios tell a business what ability they have to pay off short term debts. The two calculations you will use to do that are called the “current ratio” and the “acid test ratio” (also called the “quick ratio”).

Course curriculum

  • 1

    Course Information & Support

    • Please Check Now That Your Phone Is In Your Bag. Please Stay For 40 Minutes Of Learning & Sign Out For The Bathrrom During The Last 5 Minutes of Class.

    • Fact Sheet Packet Of Class Policies- Please Scroll Through And Review Again

    • How Well Are You Demonstrating The IB Learner Characteristics? Which Is Your Super Power & Which Presents The Greatest Challenge?

    • Welcome IB Business Management Student

    • Chapter Work Cycle = This Is What We Are Doing In Class & For Homework Every Day

    • Finished Early? Don't Pack Up! Do This ...

    • Please Don't Disrupt Our 40 Minute Work Cycle. Leave For The Bathroom During The LAST 5 MINUTES Of Class.

    • Your Quarter Grade
  • 2

    Your Notebook Is Your Most Important Weekly Grade & Prepares You For The May Exams

    • New 3.5 Chapter = 13 Headings

    • Read The Rules For Your Notebook Before Every Grading Day. This Paper Must Be Stapled Onto The Inside Cover Of Each Composition Notebook

    • Video: Watch A Spider Map Being Created (Best Study Tool)

    • How To Draw A Spider Map

    • LOOK: Page-By-Page Visual Instructions For Earning a 100% On Every Notebook Chapter. (NEW For 2024)

    • Video: Take A Tour Of A Business Management Composition Notebook

    • This Is How Your Notebook Pages Will Be Graded

    • Notebook Checklist & Reflection Sheet- Print, Complete, And Staple Onto The Last Page Of Your Chapter Notes BEFORE Scoring Day. It's Best To Pick Up This Blue Color Checklist In Class After We Finish The Chapter Review.
  • 3

    "RESOURCE BANK" = Topic Lessons (39) Begin Below this Point:

    • What is the Resource Bank?

    • RB = 6 Sections With 39 Posts (= 3 RB Days + HW)

    • What You Should Be Able To Do By the End Of This 3.5 Chapter
  • 4

    Ratio Analysis (= 2 Ratio Groups In This Chapter: Profitability & Liquidity)

    • What Is A Ratio?

    • Video: An Example Of The News Reporting Profitability

    • Video: Let's Review The Meaning Of "Working Capital"

    • Video: What Does Ratio Analysis Mean?

    • Video: What Is A Profit Margin?

    • Key Terms: What's The Difference Between Gross Profit and Gross Profit Margin? What's the Difference Between Net Profit and Net Profit Margin?

    • There Are 3 Ratio Groups & 5 Ratio Calculations On The IB Exams

    • Video: Short & Simple Explanation Of Ratio Analysis

    • Introduction To The 5 Calculations

    • How Do The 5 Ratio Calculations Fit Into The 3 Ratio Groups?

    • Video: Introduction To Ratio Analysis

    • Exam Tip: Understand The Why & How Of Ratios

    • Video: The Limitations Of Ratio Analyses

  • 5

    Calculating Profitability Ratios = GROSS PROFIT MARGIN

    • Video: What You Need To Know About The Gross Profit Margin

    • Visual: Profit Margin Basic Idea

    • Visual: What Exactly Does The Gross Profit Margin Tell Us? This Image Makes It Really Clear!

    • Video: Intro To Profitability Ratios (Operating Profit Is Not On Our Syllabus But It IS Used In The Real World)

    • Video: Deep Explanation Of Gross Profit Margin

    • Video: How To Calculate A Gross Profit Margin
  • 6

    Calculating Profitability Ratios = NET PROFIT MARGIN

    • Video: Very Quick Explanation Of The Net Profit Margin

    • Video: Full Example Of How To Calculate Net Profit

    • Visual: What Exactly Does The Net Profit Margin Tell Us? This Image Makes It Really Clear!

    • Handout: How To Increase Gross And Net Profit Margins & What Happens When You Do

    • Exam Tip: Profit Margins & A Balanced Response

    • BONUS RATIO: Operating Profit Margin Calculation (You May Use This On Your IA & EE & IB Exams)
  • 7

    Calculating Another Profitability Ratio = Return On Capital Employed (ROCE)

    • Key Term: ROCE

    • Video: A Business Teacher Explains ROCE

    • Video: Deep Explanation Of ROCE
  • 8

    Calculating Liquidity Ratios = CURRENT RATIO

    • Key Term: Liquidity Ratios

    • Video: Do You Understand What "Working Capital" Means?

    • Video: How To Calculate The Current Ratio

    • Video: What Are Liquidity Ratios?

    • Handout: 7 Ways To Improve Liquidity With A Closer Look At The Ratios
  • 9

    Calculating Liquidity Ratios = ACID TEST/QUICK RATIO

    • Visual: Liquid Assets vs. Non-Liquid Assets

    • Video: Acid Test Ratio Calculation

    • Handout: 4 Ways To Increase Liquidity Ratios

    • Video: A Fun Final Look At The Concept Of Liquidity
  • 10

    Profitability And Ratio Analysis & The CCES Concepts (Creativity-Change-Ethics-Sustainability)

    • Video: How To Talk About "Opportunity Costs" & "Trade Offs" (= Strategy)

    • Video: ChatGPT4 Can Analyze Business Data

    • Read These CCES Definitions. If You Write Them On Your May Exams You Get Credit For Clear Evidence of "Synthesis & Evaluation"

    • CCES Assignment: Write 4 CCES Impact Statements For This Chapter Following The Given Model

    • Finished Early? Don't Pack Up! Do This ...
  • 11

    Let's Do Some Case Studies

    • Visual Of Case Study Day 1 Process

    • Day 1 Participation Requirements During Sharing

    • Instructions for Analyzing Case Studies

    • New Command Terms Definitions List (2024+) Exams = Rules for Answering Test Questions

    • Old Command Terms List = Rules for Answering Test Questions

    • New 3.5 Assigned Case Studies (6 in Total)

    • Show Your Teacher Your Completed Case Studies Then ...

    • DO NOT OPEN The Answer Key for the Case Study Until Everyone On Your Team Has Shared Their Best Guess For Every Question. (These Are The New 3.5 Markscheme & Examiners' Notes)

    • Visual Of Case Study Day 2 Process (Show & Tell Your Presentation- Don't Pass It Around- Give Command Term Definitions)

    • Finished Early? Don't Pack Up! Do This ...
  • 12

    Review Activities

    • WATCH: 3.5 Chapter Review

    • Instruction Sheet for Review Assignment

    • What Should You Do If You Get Stuck On A Question? Don't Skip It! Do This...

    • New 3.5 Review Worksheets With 9 Tasks 1-15 M/C (Title The Top Of A New Page. Then Label The Tasks And Write The Answers In Your Composition Notebook)

    • Put Away Your Pen & Pencil On Review Day- Only Have A Color Pen On Your Desk

    • 3.5 Quizlet

    • Have You Achieved the 3.5 Key Learning Outcomes?

    • You Are Almost Finished!

    • Don't Forget The Last Piece!

    • Finished Early? Don't Pack Up! Do This ...

    • Memorize & Review The 3.5 Exam Formulas
  • 13

    Chapter 3.5 Bonus Exam Prep -Take Notes On These Posts After Review Day. Complete The Exercises & Number Each Post

    • Write Answers For The 5 Ratio Analysis Calculations (This is also the intro you write for your quantitative analysis section on your IA)

    • Handout: The IB Exam Formula Sheet Has All 5 Of Your Profitability & Liquidity Ratio Formulas!

    • Video: Quick Review Of The Limitations Of Ratio Analyses

    • Visual: When You Look At This Picture, What Can You Write Off The Top Of Your Head About Each Ratio Analysis? (Write 5 Separate Paragraphs)

    • Exam Practice: Net Profitability, Profitability & ROCE (Write Your Answer Before Looking At The Markscheme)

    • Exam Practice: Current Ratio & Acid Test/Quick Ratio (Write Your Answer Before Looking At The Markscheme)
  • 14

    Your Written IA Paper

    • Exam Tip: Practice The 5 Calculations With Your IA Business :)

    • Bonus #1 An Excel Worksheet That Calculates The Financial Data For You

    • Bonus #2 A Blank Ratio Analysis Table To Use For Your IA Or EE
  • 15

    3.5 Quiz Scheduled

    • Come Here On Quiz Day If You Are In The Classroom - Makeups Are On The Day You Return

    • Visual: Quiz Day Schedule Of Activities

    • After the Quiz = May Exam Prep