CPD · Accountancy

Analysing ratios for a board

Turning accounts into a short, honest ratio summary.

about this course

What you will be able to do

L5 SpecialistAbout 4 hours (240 minutes) of CPDSelf-study plus role-playAccountancy

Turning accounts into a short, honest ratio summary.

Calculate six ratios, given a set of accounts, with no arithmetic errors and units shown.
Compare two periods, given results, stating two changes and a likely cause for each.
Present a one-page summary, given the figures, in plain words with one recommendation.
Challenge a ratio, given a sample claim, by naming what it does not show.

Task, condition and standard

Task

Calculate six ratios from two years of statements, compare them, explain each change in plain words and present a one-page summary for a board.

Condition

Given two years of invented statements, a ratio formula sheet and a one-page template, working in a four-hour supervised session.

Standard

Produce six ratios with no arithmetic errors and units shown, two changes each with a likely cause, one recommendation and a one-page summary that meets every checklist point.

These courses teach process, communication and recording. They give no clinical, legal, tax, financial or engineering sign-off. A named subject expert must review every line, and you must check your own professional body's current CPD rules, before you rely on a certificate.

sessions

8 modules

Module 1 What a board wants in one page 20 min

Boards read in two minutes
Few figures, each with a meaning
Say what to do, not only what happened

Worked example. A board page shows six figures, each with a one-line meaning. Example: Current ratio 1.5 (last year 1.8): less cover for short-term debts. It does not list every number in the accounts.

Practise: Practise with a case card or template for "what a board wants in one page": calculate six ratios, given a set of accounts, with no arithmetic errors and units shown.

Standard to meet. Explain what a board expects on a single page, choosing a few figures that each carry a one-line meaning rather than listing every number.

Module 2 Six ratios and their formulas 45 min

Write each formula before using it
Show units: ratio, percent, days
Check arithmetic twice
Ratios depend on accounting choices and one-off items

Worked example. Worked-example figures, this year: revenue 1,200, cost of sales 780, net profit 96, current assets 600, current liabilities 400, inventory 150, receivables 200, payables 130. Current 600 / 400 = 1.5. Quick (current assets without inventory) (600 - 150) / 400 = 1.13. Gross margin 420 / 1,200 = 35.0%. Net margin 96 / 1,200 = 8.0%. Debtor days (how long customers take to pay) 200 / 1,200 x 365 = 61. Creditor days (how long we take to pay suppliers) 130 / 780 x 365 = 61.

Practise: Practise with a case card or template for "six ratios and their formulas": compare two periods, given results, stating two changes and a likely cause for each.

Standard to meet. Calculate the six ratios, current, quick, gross margin, net margin, debtor days and creditor days, from a set of statements using the correct formulas.

Module 3 Comparing with last year 30 min

Compare like with like
State direction and pace
One number alone says little

Worked example. Last year: current 540 / 300 = 1.8; gross margin 360 / 1,000 = 36.0%; debtor days 150 / 1,000 x 365 = 55. Changes: current ratio down 0.3 (about 17 percent), gross margin down 1.0 point, debtor days up 6.

Practise: Practise with a case card or template for "comparing with last year": present a one-page summary, given the figures, in plain words with one recommendation.

Standard to meet. Compare each ratio with last year's figure and state the direction and pace of change, because a single number means little without a reference.

Module 4 Explaining a change in plain words 30 min

Say what changed
Give one likely cause
Suggest one action

Worked example. Note: "Liquidity fell from 1.8 to 1.5 because supplier balances rose faster than cash. Action: review payment timing." Cause given, action named, no jargon.

Practise: Practise with a case card or template for "explaining a change in plain words": challenge a ratio, given a sample claim, by naming what it does not show.

Standard to meet. Explain a change in a ratio in plain words, giving a likely cause and a suggested action, as in the liquidity worked example.

Module 5 Building the one-page summary 35 min

Table first, words second
Name the source of the numbers
End with one recommendation

Worked example. One page: six ratios in a table with this year, last year and arrow; one plain-words line each; source line: "From the signed accounts, years 1 and 2." Recommendation: review payment timing and chase receivables over 60 days.

Practise: Practise with a case card or template for "building the one-page summary": challenge a ratio, given a sample claim, by naming what it does not show. Use a new case this time (round 2).

Standard to meet. Build a one-page summary from two years of statements, showing six ratios, a plain-words note on each change and the source of the numbers.

Module 6 Assessment 20 min

Compute from invented statements
Write the summary within time
Check against the list

Worked example. Assessment sample: current assets 450, current liabilities 300 = 1.5. Revenue 800, cost of sales 520: gross margin 280 / 800 = 35.0%. Net profit 40 / 800 = 5.0%. Write the one-page summary and tick every checklist point.

Practise: Practise with a case card or template for "assessment": challenge a ratio, given a sample claim, by naming what it does not show. Use a new case this time (round 2).

Standard to meet. Complete a timed assessment by computing the ratios from invented statements and writing a one-page summary that meets every checklist point.

Module 7 Second case: ratio falls while sales rise 35 min

Work case card 2
Find two possible reasons
Name the first question for the finance lead

Worked example. Case card 2: sales rose 10 percent (1,000 to 1,100) but the current ratio fell from 1.8 (540 / 300) to 1.2 (480 / 400). Possible reasons: cash spent on equipment, or supplier balances rising. First question: "What happened to cash and supplier balances?"

Practise: Practise with a case card or template for "second case: ratio falls while sales rise": challenge a ratio, given a sample claim, by naming what it does not show. Use a new case this time (round 2).

Standard to meet. Explain two possible reasons for a falling current ratio when sales rise, and name the first question to ask the finance lead, using the figures on the second case card.

Module 8 Teach-back and board questions 25 min

Explain one ratio aloud in three sentences
Answer a board question about its limits
Peer checks formula, direction, cause, action

Worked example. Teach-back line: "Current ratio is current assets divided by current liabilities. It fell from 1.8 to 1.2. Likely cause: supplier balances rose; we should review payment timing." Board question: "What does this ratio not show?" Answer: it does not show when cash arrives.

Practise: Practise with a case card or template for "teach-back and board questions": challenge a ratio, given a sample claim, by naming what it does not show. Use a new case this time (round 2).

Standard to meet. Present one ratio aloud in three sentences and answer a board question about what the ratio does not show, so that a peer can confirm formula, direction, cause and action.

practice

Worked example and case cards

Worked example

Current ratio = current assets / current liabilities = 600 / 400 = 1.5. Last year 1.8. Plain-words note: "Liquidity fell because supplier balances rose faster than cash. Action: review payment timing."

Six ratios

current, quick, gross margin, net margin, debtor days, creditor days.

Case card

two years of invented statements; learners compute 6 ratios and write a one-page summary.

Case card 2

Current ratio fell from 1.8 to 1.2 while sales rose 10 percent. Learners give two possible reasons and the first question for the finance lead.

checks

10 check questions with model answers

Formula for gross margin?

Model answer: (Revenue - cost of sales) / revenue. (Covered in module 2: Six ratios and their formulas. To pass that module: Calculate the six ratios, current, quick, gross margin, net margin, debtor days and creditor days, from a set of statements using the correct formulas.)

A falling current ratio means?

Model answer: Less cover for short-term debts; look at why. (Covered in module 4: Explaining a change in plain words. To pass that module: Explain a change in a ratio in plain words, giving a likely cause and a suggested action, as in the liquidity worked example.)

Why compare to last year?

Model answer: A single number means little without a reference. (Covered in module 3: Comparing with last year. To pass that module: Compare each ratio with last year's figure and state the direction and pace of change, because a single number means little without a reference.)

Name one limit of ratios.

Model answer: They depend on accounting choices and one-off items. (Covered in module 2: Six ratios and their formulas. To pass that module: Calculate the six ratios, current, quick, gross margin, net margin, debtor days and creditor days, from a set of statements using the correct formulas.)

Formula for the current ratio?

Model answer: Current assets divided by current liabilities. (Covered in module 2: Six ratios and their formulas. To pass that module: Calculate the six ratios, current, quick, gross margin, net margin, debtor days and creditor days, from a set of statements using the correct formulas.)

Why compare with last year, not only a target?

Model answer: Shows direction and pace. (Covered in module 3: Comparing with last year. To pass that module: Compare each ratio with last year's figure and state the direction and pace of change, because a single number means little without a reference.)

What if a ratio looks good but cash is low?

Model answer: Check timing of receivables; a ratio alone can hide it. (Covered in module 2: Six ratios and their formulas. To pass that module: Calculate the six ratios, current, quick, gross margin, net margin, debtor days and creditor days, from a set of statements using the correct formulas.)

How many numbers on the board page?

Model answer: Few; each with a one-line meaning. (Covered in module 1: What a board wants in one page. To pass that module: Explain what a board expects on a single page, choosing a few figures that each carry a one-line meaning rather than listing every number.)

Who sees the working file?

Model answer: Finance and the reviewer, with the source noted. (Covered in module 5: Building the one-page summary. To pass that module: Build a one-page summary from two years of statements, showing six ratios, a plain-words note on each change and the source of the numbers.)

How do you calculate debtor days?

Model answer: Receivables divided by revenue, times 365. Example: 200 / 1,200 x 365 = about 61 days. (Covered in module 2: Six ratios and their formulas. To pass that module: Calculate the six ratios, current, quick, gross margin, net margin, debtor days and creditor days, from a set of statements using the correct formulas.)

glossary

Words used in this course

ratio, liquidity, margin, trend, source note.

marking

How the practice and assessment are marked

Level	Meaning	Marks of 4
Secure	Meets the standard in the outcome every time, no prompts	4
Meeting	Meets the standard with one small slip, corrected when prompted	3
Developing	Meets part of the standard; needs a re-attempt	2
Not yet	Standard not met	1

Pass = average 3 or more, and no outcome at 1. You may re-attempt after feedback. The subject expert sets any stricter pass mark.

where next

Ladder L1 to L7, slide by slide with notes

Slide 1: L1 Basic: What is a ratio. Speaker note: A ratio compares one number with another, such as what we own against what we owe. Learners at this level only know the idea and can say that ratios help people read accounts quickly.
Slide 2: L2 Awareness: Reading a set of accounts. Speaker note: Show a simple income statement and balance sheet. Learners find revenue, cost of sales, current assets and current liabilities and know these are the ingredients of the six board ratios.
Slide 3: L3 Foundation: Working out one ratio. Speaker note: Learners follow a worked example: current assets 600 divided by current liabilities 400 gives 1.5. They repeat it with a new set of figures and show the units. Guided, one ratio at a time.
Slide 4: L4 Practitioner: One page for the board. Speaker note: This course sits here. The learner calculates all six ratios from two years of statements, compares them, explains each change in plain words with a cause and action, and produces a one-page summary.
Slide 5: L5 Specialist: Reading beneath the ratio. Speaker note: The specialist asks what a ratio hides: one-off items, accounting choices, timing of receivables. They challenge a claim such as a good current ratio with low cash and build industry comparisons.
Slide 6: L6 Advanced: Trends and targets. Speaker note: The advanced analyst builds multi-year trends, sets sensible targets with the board, links ratios to decisions on stock, credit terms and borrowing, and reviews whether the six chosen still fit the business.
Slide 7: L7 Super expert: Designing the board pack. Speaker note: The super expert designs the whole reporting pack and its rules: which measures, how often, who challenges, how sources are shown. Reports stay short, true and ready for a decision.

This course sits at L5 Specialist. Credits stack; aligned with, not accredited by, any framework.

jobs this leads to

Where this takes you

Finance assistant
Management accounts assistant
Junior financial analyst
Accounts technician
Business support analyst

assessment and certificate

How you are checked

Each outcome is checked against its standard with a checklist or a short test. A digital CPD record shows the hours. Keep evidence in My page. Aligned with common CPD practice; not accredited. Learners check their own body's rules.

ten locations and global

Your place

Use your own body's forms, units and currency. Local professional bodies set the rules for CPD hours; check them first.

India (Bengaluru)

Language: English, Hindi, Kannada. Personal data: Digital Personal Data Protection Act 2023. Credit and levels: National Skills Qualifications Framework (NSQF) and the national credit framework.

Netherlands (Eindhoven area)

Language: Dutch, English. Personal data: EU GDPR (Dutch: AVG), supervised by the Autoriteit Persoonsgegevens. Credit and levels: the Dutch qualification framework (NLQF) linked to the European Qualifications Framework.

UAE (Dubai and Abu Dhabi)

Language: Arabic, English. Personal data: Federal Decree-Law No. 45 of 2021 (personal data protection). Credit and levels: the emirate education and training regulators (for example KHDA in Dubai) and the national qualifications framework.

Brazil (Sao Paulo)

Language: Portuguese (Spanish and English support). Personal data: LGPD (Lei Geral de Protecao de Dados). Credit and levels: the national technical-education catalogue and the national S-system training bodies.

Canada (Toronto)

Language: English, French. Personal data: PIPEDA, with provincial rules where they apply. Credit and levels: the provincial colleges framework and the national credential-recognition guidance.

United States

Language: English, Spanish. Personal data: state privacy laws (for example California), and COPPA for children under 13. Credit and levels: state and community-college credit systems.

Singapore

Language: English, Mandarin, Malay, Tamil. Personal data: Personal Data Protection Act (PDPA). Credit and levels: the Singapore national skills frameworks and the national credit system.

Australia

Language: English. Personal data: the Privacy Act 1988 and the Australian Privacy Principles. Credit and levels: the Australian Qualifications Framework (AQF) levels.

Hong Kong (Eastern Asia)

Language: Chinese (Cantonese, Mandarin), English. Personal data: the Personal Data (Privacy) Ordinance. Credit and levels: the Hong Kong Qualifications Framework.

Georgia and Israel (Western Asia)

Language: Georgian, Hebrew, Arabic, English. Personal data: the personal data law of the country where the learner lives. Credit and levels: the national qualifications framework of that country.

Cayman Islands (Caribbean)

Language: English. Personal data: the Data Protection Act. Credit and levels: the local education and training framework.

Mexico

Language: Spanish, English. Personal data: the federal law on personal data held by private parties. Credit and levels: the national competency certification system and the education ministry levels.

Draft

Draft CPD course. It opens only after final checks. No fee is shown.

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