Lesson Plan

• Describe the main limitations of published accounts when evaluating performance.
• Explain how these limitations affect the reliability of ratio analysis.
• Evaluate the impact of accounting policies and one‑off items on financial interpretation.
• Apply a checklist to adjust ratios for identified limitations.
• Compare quantitative ratio results with qualitative information for sound business decisions.

• Projector and screen
• PowerPoint slides summarising limitations
• Sample published accounts (handout)
• Ratio calculation worksheet
• Calculator or spreadsheet software
• Whiteboard and markers

Begin with a quick poll: “Why do investors trust financial statements?” Connect this to students’ prior knowledge of ratio analysis and highlight that today they will discover why those ratios can be misleading. By the end of the lesson they will be able to identify key limitations and adjust their analysis accordingly.

1. Do‑now (5') – Students list perceived advantages of ratio analysis on sticky notes; share a few.
2. Mini‑lecture (10') – Overview of published accounts (income statement, balance sheet, cash‑flow, notes) and why they are used.
3. Interactive discussion (10') – Examine each limitation of published accounts using real‑world examples.
4. Group activity (15') – Calculate a profitability ratio from the sample accounts, then identify and adjust for one‑off items.
5. Ratio analysis limitations (10') – Teacher presents limitations; students match each to a scenario on the board.
6. Consolidation (5') – Whole‑class creation of a comparative summary table (accounts vs. ratios).
7. Exit ticket (5') – Write one key limitation and a strategy to mitigate its effect in future analyses.

Recap the major limitations of both published accounts and ratio analysis and how they influence decision‑making. Collect exit tickets to gauge understanding, and assign a brief homework: analyse a short case study, identify at least two limitations, and suggest adjustments to the presented ratios.