Lesson Plan

• Describe how debt and equity financing alter key liquidity, solvency and profitability ratios.
• Calculate baseline ratios and model the effect of a financing change on those ratios.
• Analyse the strategic implications of ratio changes for different stakeholder groups.
• Apply a decision‑making checklist to recommend an optimal financing mix.

• Projector and screen
• Whiteboard and markers
• Printed balance‑sheet handouts (baseline data)
• Worksheet with ratio formulas and scenario tables
• Calculators (or spreadsheet access)
• Exit‑ticket slips

Begin with a brief news clip about a company choosing between a loan and a share issue. Ask learners to recall which ratios they use to judge a firm’s financial health. Explain that today they will see exactly how those financing choices shift the numbers and why stakeholders care.

1. Do‑now (5') – quick quiz on definitions of Current Ratio, D/E, Interest Cover, ROE.
2. Mini‑lecture (10') – walk through the table of ratios, highlighting the expected direction of change with more debt vs. more equity.
3. Guided practice (15') – students calculate the baseline ratios from the provided balance sheet.
4. Group activity (15') – each group works on Scenario A (debt) or Scenario B (equity), recomputes the ratios and prepares a short comparison.
5. Class discussion (10') – groups share findings; teacher links results to stakeholder concerns (lenders, investors, management).
6. Check for understanding (5') – exit‑ticket: “If a firm wants to improve its ROE quickly, which financing option is more likely and why?”

Summarise that debt boosts leverage but can weaken solvency, while equity strengthens balance‑sheet ratios but may dilute returns. Collect exit tickets and remind students to complete the “Financing Decision Checklist” as homework, applying it to a different case study.