Lesson Plan

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Lesson Plan
Grade: Date: 17/01/2026
Subject: Business Studies
Lesson Topic: calculate and interpret the following liquidity ratios: – current ratio – acid test ratio
Learning Objective/s:
  • Calculate the current ratio using the appropriate formula.
  • Calculate the acid‑test (quick) ratio using the appropriate formula.
  • Interpret what each ratio indicates about a business’s short‑term liquidity.
  • Compare liquidity positions of different firms using ratio results.
  • Apply ratio calculations to exam‑style practice questions and justify conclusions.
Materials Needed:
  • Projector and screen
  • Whiteboard and markers
  • Calculators (one per student)
  • Worksheet with balance‑sheet extracts (ABC Ltd. example)
  • Printed handout of formulas and interpretation guide
  • Practice question sheets (XYZ Co., etc.)
 Introduction:
Begin with a quick discussion: why is it important for a business to meet its short‑term debts? Review prior learning on current assets and liabilities. Explain that today students will be able to calculate and interpret both the current ratio and the acid‑test ratio and demonstrate this through a worked example and practice questions.
Lesson Structure:
  1. Do‑now (5') – Students calculate a simple current ratio from a set of figures displayed on the board.
  2. Mini‑lecture (10') – Define liquidity, current ratio, and acid‑test ratio; present formulas and key interpretation points.
  3. Guided practice (15') – Walk through the ABC Ltd. example; students complete each calculation step on the worksheet.
  4. Pair work (10') – Solve practice question 1 (XYZ Co.) and discuss the meaning of the resulting ratios.
  5. Whole‑class discussion (10') – Review questions 2 and 3, exploring reasons for low ratios and the impact of inventory on liquidity.
  6. Check for understanding (5') – Exit ticket: write one implication of a current ratio > 1 and one implication of an acid‑test ratio < 1.
Conclusion:
Recap that the current ratio shows overall short‑term coverage while the acid‑test ratio focuses on quick assets. Students complete an exit ticket stating the key implication of each ratio. For homework, assign two new balance‑sheet extracts for students to calculate both ratios and write brief interpretations.