What is Financial Analysis? Financial Analysis Finance Lesson Plan
Performance Objective Students will understand and analyze accounting data to examine the financial stability of businesses. Specific Objectives  Understand the accounting process  Identify four fields of accounting  Identify four major financial statements  Understand post‐secondary opportunities related to financial analysis Terms  Financial Analysis‐ evaluation of a business through ratio analysis of financial statements  Accounting‐ the process of planning, recording, analyzing, and interpreting financial information  Accounting System‐ the process of summarizing financial data into accounting reports  Financial Accounting‐ area of accounting that presents financial information for external users  Managerial Accounting‐ the area of accounting that presents financial information for internal users  Cost Accounting‐ the area of accounting that analyzes costs  Tax Accounting‐ the area of accounting that applies tax laws and is regulated by the Internal Revenue Service  Inputs‐ information collected and recorded in journal entries  Processing‐ posting journal entries to the appropriate ledger accounts  Outputs‐ the transformation of ledger account balances into financial statements  Balance Sheet‐ the financial statement that reports assets, liabilities, and owner’s equity on a specific date  Income Statement‐ a financial statement that shows the revenue and expenses for an accounting period  Statement of Changes in Owner’s Equity‐ a financial statement that shows changes in the ownership account (Capital) during an accounting period  Cash Flow Statement‐ a financial statement that shows cash receipts and payments from operating, financing, and investing activities of a business Time When taught as written, this lesson should take approximately three to four days to teach. Copyright © Texas Education Agency, 2014. All rights reserved.
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Preparation
TEKS Correlations This lesson, as published, correlates to the following TEKS. Any changes/alterations to the activities may result in the elimination of any or all of the TEKS listed. Financial Analysis 130.168 (c) Knowledge and Skills (1) The student analyzes accounting systems to examine their contribution to the fiscal stability of businesses. The student is expected to: (a) describe the nature and scope of accounting. Interdisciplinary Correlations English‐English I  110.31(b)(1) Reading/Vocabulary Development. Students understand new vocabulary and use it when reading and writing.  110.3(b)(11) Reading/Comprehension of informational text/procedural texts. Students understand how to glean and use information in procedural texts and documents. Math‐Algebra I  111.32(b)(1)(C) Interpret and make decisions, predictions, and critical judgments from functional relationships. Social Studies‐World Geography 113.34(c)(20)(A) Describe the impact of new technologies, new markets, and revised perceptions of resources. Occupational Correlation (O*Net – www.onetonline.org/): Job Title: Personal Financial Advisor O*Net Number: 13‐2052.00 Reported Job Titles: Certified Financial Planner (CFP), Investment Advisor, Portfolio Manager Tasks 
Prepare or interpret for clients information such as investment performance reports, financial document summaries, or income projections  Analyze financial information obtained from clients to determine strategies for meeting clients' financial objectives  Review clients' accounts and plans regularly to determine whether life changes, economic changes, environmental concerns, or financial performance indicate a need for plan reassessment Soft Skills Critical Thinking, Judgment and Decision Making, Complex Problem Solving Copyright © Texas Education Agency, 2014. All rights reserved.
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Accommodations for Learning Differences It is important that lessons accommodate the needs of every learner. These lessons may be modified to accommodate your students with learning differences by referring to the files found on the Special Populations page of this website. Preparation  Review and familiarize yourself with the terminology and website links.  Have materials and websites ready prior to the start of the lesson. References  http://www.bls.gov/ooh/Business‐and‐Financial/Financial‐analysts.htm#tab‐2  https://www.uclaextension.edu/bam/finance/Pages/indstryCerts.aspx  http://www.bls.gov  Century 21 Accounting: Advanced, South‐Western Publishing  Contemporary Mathematics for Business and Consumers, South‐Western Publishing  http://www.sec.gov/investor/pubs/begfinstmtguide.htm Instructional Aids  Textbook or Computer Program Diagrams/Charts  Lesson 1.01 Presentation  Instructor Computer/Projection Unit  Websites Introduction
The main purposes of this lesson are to help students understand  the purpose of recording financial data  college and career opportunities related to financial analysis  the different fields of accounting Ask students if they know the names of any of the financial statements. Ask students if they know who would be interested in a company’s financial condition. Copyright © Texas Education Agency, 2014. All rights reserved.
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Outline
I. What is financial analysis? A. evaluating a company’s performance B. using past data to predict future performance C. analyzing financial statements through the use of ratio analysis, vertical, and horizontal analysis D. uses data to assess the wellness of different areas of a business E. usually a part of the accounting process II. Accounting and its purpose A. The process of planning, recording, analyzing, and interpreting financial information B. Provides internal information for management C. Provides external information for potential investors or stockholders III. Accounting Systems‐ the process of summarizing financial data into accounting reports A. Manual‐ accounting procedures without the aid of a computer 1. Costs less 2. More human error, takes more time, more difficult to prepare accounting documents and statements Ask students if they know what it means to analyze a company. Then explain a little about it using the presentation slides. Ask students if they know what accounting is. Record some of their responses on the board. Go through the next two slides having to do with accounting and check off any of the items they mentioned. Now ask the students about manual versus computerized accounting. Have students volunteer pros and cons to each type of system. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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Visual/Spatial
B. Computerized‐ accounting solely on a computer 1. less human error, takes less time 2. costs more C. Single‐entry‐ similar to a checkbook 1. simpler, ideal for very small businesses 2. more errors can be made D. Double‐entry‐ each debit must have a credit 1. more accurate, errors can be easier to identify 2. more complicated IV. V. Fields of Accounting A. Financial B. Managerial C. Cost D. Tax Financial Accounting A. provides an overview of a company’s performance B. follows GAAP (Generally Accepted Accounting Principles) C. mainly for external presentation of information such as financial statements VI. Managerial Accounting A. primarily for internal information purposes Make a chart with columns on the board for the pros and cons. After, go through the slide and compare their answers. Tell students that, although we will be focusing mostly on financial accounting, there are other fields of accounting. Look at some college websites for courses with these names, so students can see the differences between the different accounting fields. If they choose to major in business, they may have to take several courses in these areas to be exposed to different fields of accounting. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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B. Aids management functions such as 1. planning, as in budgets 2. organizing, as in carrying out objectives and monitoring activities 3. control purposes, as in implementing plans 4. decision‐making, as in all aspects of product development VII. Cost Accounting A. actually part of managerial accounting B. purpose is understanding the cost of conducting business 1. costs of products and services 2. costs of resources 3. costs associated with departments VIII. Tax Accounting A. follows IRS rules and regulations B. used to prepare a multitude of tax statements and forms C. looks at profit and loss statements specifically IX. The Accounting Process A. Inputs‐ collecting transaction information through journal entries. Because Accounting I is a prerequisite for this course, they have probably already been exposed to GAAP (Generally Accepted Accounting Principles). Search online for some of the GAAP principles they have used in class as a review. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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Visual/Spatial
B. Processing‐ posting those journal entries to the appropriate ledger accounts C. Outputs‐ turning the ledger balance information into financial statements X. Financial Statements A. Balance Sheet‐ contains assets, liabilities, and owner’s equity accounts B. Income Statement‐ contains revenue and expense accounts C. Statement of Changes in Owner’s Equity‐ show additions and subtractions to the capital account during an accounting period D. Cash Flow Statement‐ records cash flow from operations, from investing activities, and from financing activities XI. Audiences for Financial Analysis A. outside investors and stockholders B. internal management C. creditors, or potential creditors D. suppliers E. credit rating agencies Explain to students the process of accounting. Even if they have taken the course, they may not realize the explanation of the accounting process. Remind them of the accounting cycle and present a diagram to demonstrate where the inputs, processing, and outputs fit into the cycle. Preparing financial statements are also part of the accounting cycle. They are considered the outputs of the accounting process. The statements are what all of the steps are prepared for. Ask students who actually is interested in financial statements and record their responses. As you go through the slide, check off the ones that the students mentioned. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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Visual/Spatial
XII. Post‐Secondary Education‐ important to many different aspects of a person’s future including A. college majors B. industry certifications XIII. College Majors A. finance B. accounting C. insurance D. real estate E. economics XIV. Industry Certifications A. Chartered Financial Analyst® B. Certified Management® Accountant C. Certified Financial Planner® XV. Career Opportunities A. Financial Analyst‐ evaluate the performance of various types of investments B. Budget Analyst‐ help institutions organize their finances and prepare budget reports C. Insurance Underwriters‐ analyze applications for insurance to determine premiums and coverage amounts D. Financial Advisors‐ help people with investment advice and financial decisions Locate a variety of colleges and see what majors they have where they may have to take accounting or finance classes. They should be able to find several degree programs. In pairs, have students conduct an Internet search to locate a variety of industry certifications. If they also look for preparation programs for these certifications, they should find several courses that relate to financial analysis. Have students go to the http://www.bls.gov website and locate the job titles listed in the presentation. Have students volunteer responses to the requirements involving experience, education, or training related to financial analysis. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
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Visual/Spatial
Application
Guided Practice The students can participate in a “I have . . . who has” vocabulary activity. The teacher can prepare index cards for this activity. Following is an example of how the cards are written. Essentially, students will write the term and then the definition of the word below, so the process is a “loop” of terms and definitions. The last person’s “who has” is the first person’s “I have.” I have:
I have:
Financial Analysis
Who has:
Accounting
Who has:
the process of
planning, recording,
analyzing and interpreting
financial information
the process of
summarizing financial data into
accounting reports
Even in high school students like using this for vocabulary. There is a template of cards located later in this lesson. Independent Practice If you are in a computer lab, students can conduct Internet research on what financial analysis means to a company or potential investors, or any other information about financial analysis or accounting systems that you request. They can research careers on their own or college majors for a college of their choice that may not have been discussed in the outline. Summary
Review Ask students the following questions on exit tickets: Question #1: What is one reason financial analysis is important? Answer #1: A company can predict future performance based on past data, and the wellness of different areas of the business can be assessed. Question #2: Which field of accounting deals with information to be presented externally? Answer #2: Financial accounting deals mainly with information to be presented externally. Copyright © Texas Education Agency, 2014. All rights reserved.
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Question #3: Which part of the accounting process involves turning ledger information into financial statements? Answer #3: Outputs are the part of the process dealing with financial statements. Question #4: What are the four most common financial statements? Answer #4: Balance Sheet, Income Statement, Statement of Changes in Owner’s Equity, and Cash Flow Statement Question #5: What are some areas of an individual’s future that financial analysis can be a part of? Answer #5: College majors, industry certifications, and career choices. Evaluation
Informal Assessment Any and all of the following can be used as informal assessments  Exit tickets with vocabulary  Pair‐share activities  Class discussion and participation Formal Assessment The following can be considered a formal evaluation  Financial Analysis Research Assignment #1 Divide students in groups of three or four, depending upon your class size. Have students conduct Internet research on accounting and accounting systems. They should record at least 10 facts each. They will then compare each other’s lists and narrow the facts down to one list. The list will be posted in the room along with the other groups’ lists.  Group Presentation Assignment #2 Divide students into groups of three to four, again depending upon the class size. Assign each group a topic or let them draw out of a hat (or box). Topics can include the fields of accounting, purposes of financial analysis, GAAP principles, or any other topic. Student groups are to create at least a five‐slide presentation with a handout (even if it is a note‐taking document such as Cornell Notes) for the other students to complete while they are presenting.  Career Opportunities Assignment #3 Students will research careers involving financial analysis on any of the career websites. They will select three careers and will create a Venn diagram with the three careers in each of the circles. The overlapping sections of the circles should include the duties, job responsibilities, or educational requirements that are the same for those jobs. If all three have the same attribute, that goes in the center overlap. If one particular job has a requirement the same as one of the other jobs, it goes in the overlap between those two jobs, not in the center because it is only particular to two of the three jobs. This can be done on the computer, flip chart paper, or any other medium available. Enrichment
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Extension Have students interview someone in a career related to financial analysis such as a financial planner or an accountant. If they cannot interview someone in person, they can conduct an email interview with five questions related to their occupation. They should summarize their findings in a one‐page report. Copyright © Texas Education Agency, 2014. All rights reserved.
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Financial Analysis What is Financial Analysis? Financial Analysis Research Assignment #1 Student Name: ________________________________________
CATEGORY 20 15 8 1 Contributions Routinely provides useful ideas when participating in the group and in classroom discussion. Usually provides useful ideas when participating in the group and in classroom discussion. Sometimes provides useful ideas when participating in the group and in classroom discussion. Rarely provides useful ideas when participating in the group and in classroom discussion. Quality of Work Provides work of the highest quality. Provides high quality work. Provides work that Provides work that occasionally needs to be usually needs to be checked/redone by checked/redone by other group members to others to ensure ensure quality. quality. Attitude Never is publicly critical of the project or the work of others. Always has a positive attitude about the task(s). Rarely is publicly Occasionally is publicly critical of the critical of the project or project or the the work of other work of others. members of the group. Often has a Usually has a positive positive attitude attitude about the about the task(s). task(s). Often is publicly critical of the project or the work of other members of the group. Often has a negative attitude about the task(s). Focus on the task Consistently stays focused on the task and what needs to be done. Very self‐
directed. Focuses on the Focuses on the task and task and what what needs to be done needs to be done some of the time. Other most of the time. group members must Other group sometimes nag, prod, members can and remind to keep this count on this person on‐task. person. Rarely focuses on the task and what needs to be done. Lets others do the work. Working with Others Almost always listens to, shares with, and supports the efforts of others. Tries to keep people working well together. Maximum Points Possible: 100 Usually listens to, Often listens to, shares shares, with, and with, and supports the supports the efforts of others, but efforts of others. sometimes is not a good Does not cause team member. "waves" in the group. Student Points: Copyright © Texas Education Agency, 2014. All rights reserved.
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Rarely listens to, shares with, and supports the efforts of others. Often is not a good team player. Financial Analysis What is Financial Analysis? Group Presentation Assignment #2 Student Name: ________________________________________ CATEGORY 20 15 8 1 Speaks Clearly Speaks clearly and distinctly all (100‐95%) the time, and mispronounces no words. Speaks clearly and distinctly all (100‐95%) the time, but mispronounces one word. Speaks clearly Often mumbles or and distinctly cannot be understood most (94‐85%) of OR mispronounces the time. more than one word. Mispronounces no more than one word. Handout Group provides Group handout Group handout Group handout is excellent is adequate. is slightly off extremely incomplete. handout to all topics or difficult students. to understand. Content Shows a full Shows a good Shows a good Does not seem to understanding of understanding of understanding of understand the topic the topic. the topic. parts of the very well. topic. Collaboration with Peers Almost always listens to, shares with, and supports the efforts of others in the group. Tries to keep people working well together. Usually listens Often listens to, Rarely listens to, to, shares with, shares with, and shares with, and and supports the supports the supports the efforts of efforts of others efforts of others others in the group. in the group. in the group but Often is not a good Does not cause sometimes is not team member. "waves" in the a good team group. member. Comprehension Student is able to accurately answer almost all questions posed by classmates about the topic. Student is able to accurately answer most questions posed by classmates about the topic. Maximum Points Possible: 100 Student is able to accurately answer a few questions posed by classmates about the topic. Student is unable to accurately answer questions posed by classmates about the topic. Student Points: Copyright © Texas Education Agency, 2014. All rights reserved.
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Financial Analysis What is Financial Analysis? Career Opportunities Assignment #3 Student Name: ________________________________________ CATEGORY 20 15 8 Attractiveness The diagram is exceptionally attractive in terms of design, layout, and neatness. The diagram is attractive in terms of design, layout, and neatness. The diagram is The diagram is acceptably distractingly attractive though messy or very it may be a bit poorly designed. messy. It is not attractive. Grammar There are no grammatical mistakes on the diagram. There is one grammatical mistake on the diagram. There are two grammatical mistakes on the diagram. Required Elements The diagram includes all required elements as well as additional information. All required elements are included on the diagram. All but one of Several required the required elements were elements are missing. included on the diagram. Knowledge Gained Student can Student can accurately accurately answer all answer most questions related questions to facts in the related to facts diagram and in the diagram processes used and processes to create the used to create diagram. the diagram. Student can Student appears accurately to have insufficient answer about 75% of questions knowledge related to facts about the facts in the diagram or processes and processes used in the used to create diagram. the diagram. Content ‐ Accuracy At least 10 accurate facts are displayed on the diagram. Five to six accurate facts are displayed on the diagram. Maximum Points Possible: 100 Seven to nine accurate facts are displayed on the diagram. 1 There are more than two grammatical mistakes on the diagram. Less than five accurate facts are displayed on the diagram. Student Points: Copyright © Texas Education Agency, 2014. All rights reserved.
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