Statistics and Risk
Management
Financial Resources
Performance Objective:
After completing this lesson, the student will understand what financial
information is and who needs financial information.
Approximate Time:
When taught as written, this lesson should take 4-5 days to complete.
Specific Objectives:
 The student will discuss the importance understanding of the finance
department and CFO
 The student will understand what financial information is.
 The student will review and apply basic financial information to problems
solving activities.
This lesson corresponds with Unit 3 of the Statistics and Risk
Management Scope and Sequence. Copyright © Texas Education Agency, 2012. All rights reserved. 1 TEKS Correlations:
This lesson, as published, correlates to the following
TEKS for Regression. Any changes/alterations to
the activities may result in the elimination of any or
all of the TEKS listed.
130.169(c)(6)(C)
generate a spreadsheet to collect, collate, organize, and analyze
quantitative data;
130.169.(c)(6)(D) use spreadsheets and graphical techniques to present
data in a manner that is understood by and meaningful to colleagues and
clients;
130.169.(c)(6)(E) analyze data presented in frequency distributions,
histograms, and ogives;
InterdisciplinaryTEKS:
English:
110.31 (C) (21) (B)
… organize information gathered from multiple sources to create a
variety of graphics and forms (e.g., notes, learning logs)…
110.31 (C) (22) (B)
…evaluate the relevance of information to the topic and determine the
reliability, validity, and accuracy of sources (including Internet sources)
by examining their authority and objectivity…
110.31 (C) (23) (C)
… use graphics and illustrations to help explain concepts where
appropriate…
Copyright © Texas Education Agency, 2012. All rights reserved. 2 110.31 (C) (23) (D)
… use a variety of evaluative tools (e.g., self-made
rubrics, peer reviews, teacher and expert evaluations)
to examine the quality of the research…
Math:
111.36 (C) (4) (A)
… compare theoretical and empirical probability;
111.37. (C) (3) (B)
… use probabilities to make and justify decisions about risks in everyday
life
Occupational Correlation
(O*Net - http://www.onetonline.org/)
Credit Analyst 13-2041.00
Similar Job Titles: Credit Manager, Underwriter, Credit Administrator, Credit
and Collections Analyst
Tasks:



Analyze credit data and financial statements to determine the degree of
risk involved in extending credit or lending money.
Generate financial ratios, using computer programs, to evaluate
customers' financial status.
Consult with customers to resolve complaints and verify financial and
credit transactions.
(Soft) Skills:
Critical Thinking; Active Listening; Active Learning; Mathematics
Copyright © Texas Education Agency, 2012. All rights reserved. 3 Instructional Aids:
1. Display for presentation, websites for
assignments and class discussion
2. Assignment Worksheets
3. Supporting Spreadsheets
Materials Needed:
1. Printer paper
2. Assignments and website information ready to distribute to
students.
Student projects will be displayed to increase interest in Statistics
Equipment Needed:
1. Computer with presentation and Internet Access
2. Computers for Students to Conduct Research and Collect Data
for Projects
Copyright © Texas Education Agency, 2012. All rights reserved. 4 References:
The Importance of Financial Education
This article breaks down the importance of having a sound
financial education. It discusses how financial education is
achieved, why financial education is effective, financial literacy,
and much more.
http://www.oecd.org/dataoecd/8/32/37087833.pdf
Beginners’ Guide to Financial Statements
Produced by the U.S. Securities and Exchange Commission, this article breaks
down the basics of financial documents. It provides easy to follow information
on balance sheets, income statements, cash flow statements, and more.
http://www.sec.gov/investor/pubs/begfinstmtguide.htm
The Role of Accounting and Finance in Business
Accounting and finance lie at the heart of business. It is possible to survive, for
a while at least, without an effective marketing plan, poor human resource
management and a poorly designed business strategy.
http://cws.cengage.co.uk/ryan2/students/Chapter%20overviews/Chapter%201.
pdf
Chief Financial Officer – CFO
Understanding the role of the Chief Financial Officer and the key role this office
plays in maintaining order in an otherwise chaotic climate.
www.econ.ucsb.edu/~lowes/econ191fm/CFO.ppt
Copyright © Texas Education Agency, 2012. All rights reserved. 5 Teacher Preparation:
Teacher will:
1.
presentation, and
handouts.
2.
resources and websites.
3.
websites ready.
Review terms in outline,
Locate and evaluate various
Have assignments and
Learner Preparation:
It is time to wrap up what the students have learned about
statistics. You will briefly describe commercial software for
statistics with examples the student might find interesting. Then
the student will get to apply what they have learned to analyzing
data and take an exam.
Introduction:
STUDENTS will watch the Unit video found here:
jukebox.esc13.net/untdeveloper/Videos/Financial%20Resources
.mov
STUDENTS will take the practice test and review using the Key,
found in Common/Student Documents.
EXHIBIT:
Excitement for the lesson.
INTRODUCE:
Concepts of the lesson.
ASK:
Ask students if they know any CFOs and
what they think that job entails.
Copyright © Texas Education Agency, 2012. All rights reserved. 6 I. The Finance Department
A. Finance Management
B. The CFO is primarily
responsible for managing and
growing an organization’s
assets
C. Finance Department
D. Accounting Department
1. Primary Goals
Gather Raw Data
Process Statistics
Present Findings
Who is interested
Executives and
Management
7. Stockholders
8. Lenders
9. Taxing Bodies
E. Governmental Agencies
1. Interested in what?
2.
3.
4.
5.
6.
2.
3.
4.
5.
6.
7.
8.
Industry Trends
Past Sales/Profits (Losses)
Assets (Including Cash)
Liabilities
Innovations and Projections
Truth, nothing but the truth.
A loss in trust is hard to
recover from.
9. Customers want to buy from
successful, honest firms.
10. Supplier-Partners want to
service reliable, honest
firms.
11. Rules in Business Finance
12. Those who need financing
the most will have the most
difficult time acquiring
financing.
13. Lenders already in for a
“penny” will probably lend a
“pound”.
14. Too Big to
Fail………………..
Use 10.1_TheFinance
Department.pptx
Copyright © Texas Education Agency, 2012. All rights reserved. 7 Provide Assignment sheets and discuss
and answer any questions about
assignment (In class or take homeInstructor’s Option)
II. Assessing Financial Information
A. Two Main Sources
1. Internal
2. Finance Department
B. Accounting Department
1. External
2. News Media
3. Universities
4. Government
5. Technology
C. Computerized Financial
Accounting Systems.
1. Web Browser Based
2. Markets & Brokers
3. Hand-Held Delivery
Systems
4. TV and Radio Delivery
Systems
D. Preliminary Assessment
1. Consider the Source.
2. Consider the Objective.
3. Consider the Audience.
4. Look beyond the
conclusions and examine
the data!
How does it apply to you?
Is an Action necessary?
Are Procedural Changes needed?
Are Policy Changes needed?
Cynics Look at
Sample Size and Selection
Gathering Methodologies
Analysis Methodologies
Incomplete Data Picture
Misleading Conclusions
E. Assessment Ratios
1. Profitability Ratios
measure the
profitability of the
organization.
Use 10.1a_TheFinance
Department.docx
Use 10.2_Assessing
FinancialInformation.pptx
Copyright © Texas Education Agency, 2012. All rights reserved. 8 2. Gross profit margin,
Operating profit margin
3. Net profit margin
4. Return on assets
(ROA)
5. Return on equity (ROE)
F. Assessment Ratios
1. Liquidity Ratios measure the
organization’s ability to meet
short-term obligations.
a. Current ratio
b. Quick ratio
2. Debt Ratios measure the
amount of debt an
organization is using and the
ability of the organization to
pay off the debt.
3. Total assets ratio times
interest earned ratio
4. Asset Activity Ratios measure
how efficiently the company is
using its assets.
a. Average collection
period ratio,
b. Inventory turnover
ratio, and total asset
turnover ratio.
Use 10.2a_Assessing
FinancialInformation.docx
Provide Assignment sheets and discuss
and answer any questions about
assignment (In class or take homeInstructor’s Option)
Copyright © Texas Education Agency, 2012. All rights reserved. 9 Guided Practice:
See assignments.
Independent Practice:
See assignments.
Review:
Question:
Describe what is meant by a normal distribution?
Question:
What are some main uses of confidence Intervals?
Informal Assessment:
Instructor should observe student discussion and monitor interaction.
Formal Assessment:
Completion of provided assignments using included keys for grading.
Copyright © Texas Education Agency, 2012. All rights reserved. 10 Student Assignment
10.1a The Finance Department Key
Name: ____________________
You are the CFO of a medium size natural gas exploration
firm. You are putting together a presentation to a group of
potential inventors.
Create a slide presentation that you would use to
persuade the investors to invest in your firm. What is
your audience interested in? What things will you know
as the CFO? Are ethics important to your job success?
Answers will vary per student, but look that they have
made an effort to fulfill the requirements of this
assignment at various levels. You may ask yourself does
this student understand the basic concepts of marketing
and do they consider a need to apply ethical standards to
marketing situations.
Copyright © Texas Education Agency, 2012. All rights reserved. 11 Student Assignment
10.2a Assessing Financial Information Key
Name: ____________________
You are a CFO of a very successful firm and have been
assigned by the Board of Directors to investigate the
acquisition of Company XYZ. This company will open a
whole new line of products in a different industry for your
firm.
What will you be looking at to make your recommendations
to the board? List the areas of inquiry including what you
will be looking for and why you think that is essential for a
diligent decision.
Answers will vary per student, but look that they have
made an effort to fulfill the requirements of this assignment
at various levels. You may ask yourself does this student
demonstrate the ability to understand the value and
potential value of a company and do they understand what
the concept of due diligence is.
Copyright © Texas Education Agency, 2012. All rights reserved. 12 Name:______________________________ Date:________________________ Class:______________ Financial Resources Test 1.
a.
b.
c.
A _______is an organized process for the exchange of capital and credit. Financial Return Financial Risk Financial Market 2.
a.
b.
c.
A _______is a profit earned from an investment. Financial Return Financial Risk Financial Market 3.
a.
b.
c.
A ________is the possibility that an expected profit will not be achieved. Financial Return Financial Risk Financial Market 4. Your company had net sales of $350,000 and total assets of $210,000. Find the asset turnover ratio. (Round to the nearest hundredth) a. 1.48:1 b. 0.82:1 c. 1.67:1 d. 0.60:1 5. Your company had assets of $148,100 and liabilities of $82,800. What is your current ratio? (Round to the nearest hundredth) a. 1.79:1 b. 0.56:1 c. 1.45:1 d. 2.19:1 6. Your clothing store had accounts receivable of $68,242.00 and credit sales of $1,599,025. Calculate the average collection period. (Round to the nearest day) a. 16 days b. 12 days c. 18 days d. 14 days SHORT ANSWER: 7. List the five groups who would be interested in a business’ financial information: _________________________________________________________________________________ Copyright © Texas Education Agency, 2012. All rights reserved. 13 Name:______________________________ Date:________________________ Class:______________ MATCHING: A. Debt ratio B. Efficiency ratios/Asset Activity ratio C. Working capital D. Liquidity ratios E. Profitability ratios F. Leverage ratio ______ _8. Indicate how effectively a company uses its resources to generate revenue _______ 9. Tell how much of each dollar of sales, assets, and stockholders’ investment resulted in bottom‐line net profit _______ 10. Tell how well a company can pay off its short‐term debts and meet unexpected needs for cash _______ 11. Show how and to what degree a company has financed it assets _______12. Shows the amount of debt an organization is using to pay off the debt. _______ 13. The difference between current assets and current liabilities at a point in time is known as FILL IN THE BLANK: 14. Calculate the gross and net profits and the two profit margins for the following companies: Company Name Net COGS Gross Profit Operating Sales Expenses Net Profit (Income) Gross Profit Margin Net Profit Margin Mustang Inc. 1,800,000 700,000 _______ 620,000 ______ ______ ______ Ironhorse Inc. 215,400 125,000 _______ 79,000 ______ ______ ______ Ace Inc. ______ ______ 575,000 298,000 _______ 172,900 ______ 15. Using the information calculated above, calculate the Return on investment for each company. Company Name Owner’s Equity Return on Investment Mustang Inc. 659,200 ______ Ironhorse inc. 229,000 ______ Ace Inc. 397,000 ______ Copyright © Texas Education Agency, 2012. All rights reserved. 14 16. Your company has total assets of $322,400 and total liabilities of $108,400. Figure the following: Owner’s Equity ______ Debt to Assets Ratio ______ Debt to Equity Ratio ______ 17. Calculate the amount of working capital and the current ratio for the following companies: Company Name Current Assets Current Liabilities Working Capital Current Ratio Mustang Inc. 625,200 224,800 ______ ______ Ironhorse Inc. 64,400 24,900 ______ ______ Ace Inc. 1,650,000 979,000 ______ ______ Copyright © Texas Education Agency, 2012. All rights reserved. 15 Financial Resources Test Key
1. C
2. A
3. B
4. C
5. A
6. C
7. Management/executives, stockholders, lenders, taxing bodies, governmental agencies
8. B
9. E
10. D
11. F
12. A
13. C
14. Company
Net
COGS
Gross Profit
Operating
Net Profit
Gross
Profit Net Profit
15. Name
Sales
Expenses
(Income)
Margin
Margin
Mustang Inc. 1,800,000 700,000 1,100,000 620,000 480,000 _61.1_ _26.7____
Ironhorse Inc. 215,400 125,000
90,400 79,000
11,400_ 42.0_
_5.3____
Ace Inc.
575,000 298,000
277,000 172,900 104,100 _ 48.2__ _18.1____
15. Using the information calculated above, calculate the Return on investment for each
company.
Company Name
Owner’s Equity
Return on Investment
Mustang Inc.
659,200
72.8
Ironhorse inc.
229,000
5.0
Ace Inc.
397,000
26.2
16. Your company has total assets of $322,400 and total liabilities of $108,400. Figure the
following:
Owner’s Equity
214,000
Debt to Assets Ratio 33.6%
Debt to Equity Ratio 50.7%
17. Calculate the amount of working capital and the current ratio for the following companies:
Company
Current
Current
Working
Current
Name
Assets
Liabilities
Capital
Ratio
Mustang Inc.
625,200
224,800
400,400
2.78 to 1
Ironhorse Inc.
64,400
24,900
39,500
2.59 to 1
Ace Inc. 1,650,000 979,000 671,000 1.69 to 1 Copyright © Texas Education Agency, 2012. All rights reserved. 16