Lesson Plan

• Describe what profitability means and why it is important for stakeholders.
• Explain how to calculate the main profitability ratios (GPM, OPM, NPM, ROCE, ROE).
• Interpret ratio results to assess a company’s performance and compare with industry benchmarks.
• Identify the limitations of profitability ratios when analysing published accounts.
• Apply exam techniques for answering profitability‑ratio questions.

• Projector and screen
• Whiteboard and markers
• Printed handout of profitability‑ratio table
• Sample income‑statement worksheet (£ ‘000)
• Calculators (one per student)
• Exam‑style question cards

Start with a quick poll: “If a business makes sales but no profit, is it successful?” Connect to the previous lesson on revenue generation and set the success criteria – students will be able to calculate key profitability ratios and explain what the results reveal about a firm.

1. Do‑now (5'): Short quiz on profit vs revenue to activate prior knowledge.
2. Mini‑lecture (10'): Define profitability, discuss its importance for investors, managers and creditors.
3. Guided practice (15'): Walk through the sample income statement and calculate GPM, OPM, NPM, ROCE and ROE.
4. Group activity (10'): Teams compare their ratio results with industry benchmarks and discuss reasons for differences.
5. Exam technique (10'): Model the five‑step answer process for profitability‑ratio questions.
6. Check for understanding (5'): Exit ticket – write one interpretation of a chosen ratio.

Recap the definitions, calculations and key insights from the ratios. Collect the exit tickets to gauge understanding, and assign homework: locate a real company’s published accounts, compute two profitability ratios, and write a brief commentary.