Unit 3 Finance & Accounts
Irrespective of their size, scope and sector, all organizations need robust accounting systems, making finance a core business function. In unit 3, students examine finance and accounts through both quantitative and qualitative methods. They learn how businesses represent themselves numerically through accounts; they also learn how to construct basic balance sheets and profit and loss accounts themselves. By the end of the unit, they will be able to explain the meaning of these accounts by calculating ratios (for example, gross profit margin, net profit margin and return on capital employed (ROCE)) and interpreting the results.
HL students explore aspects of finance and accounts in more depth through the study of further efficiency ratios, investment appraisals and budgets.
Finance transcends mere numbers and connects to the six concepts underpinning the course. The profitability and financial health of an organization may significantly influence its strategy, ethics, and need and willingness to change—and vice versa. The challenge of accounting is for an organization to represent itself through the common language of financial statements, which raises many TOK considerations, for example in relation to the “truth” that may or may not be found in numbers. Unit 3 also provides opportunities for students to think about the attributes of the IB learner profile. They may inquire which characteristics of the learner profile are and, in their view, ought to be valued in accounting and, more broadly, in the financial markets.
HL students explore aspects of finance and accounts in more depth through the study of further efficiency ratios, investment appraisals and budgets.
Finance transcends mere numbers and connects to the six concepts underpinning the course. The profitability and financial health of an organization may significantly influence its strategy, ethics, and need and willingness to change—and vice versa. The challenge of accounting is for an organization to represent itself through the common language of financial statements, which raises many TOK considerations, for example in relation to the “truth” that may or may not be found in numbers. Unit 3 also provides opportunities for students to think about the attributes of the IB learner profile. They may inquire which characteristics of the learner profile are and, in their view, ought to be valued in accounting and, more broadly, in the financial markets.
Conceptual Understandings:
- Change in the business structure can impact a business’ financial resources
- Creativity in financial reporting can have diverse impacts in a business
- Ethical financial and accounting practices can be a form of sustainable business behavior
Questions to consider:
- Do financial statements reflect the “truth” about a business?
- Many businesses are introducing metrics about their environmental, social or ethical performance on the side of financial information. Can well-being, or other social variables, be measured?
- How certain is the information we get from financial statements? For example, could we know in advance if an investment will be successful?
- What is the role of interpretation in accounting? For example, could we compare businesses by just looking at their financial statements?
- Often, financial information is presented to the wider audience in a graphical or summary form. Do such simplifying presentations limit our knowledge of accounts?
- Does the accounting process allow for imagination?
- Accounting practices vary from country to country. Is this necessary, or is it possible to have the same accounting practices everywhere?
- Are objective facts or appeals to emotion more effective when applying for an external source of finance?
- How do our expectations and assumptions have an impact on how we read company accounts?
- What roles do reason and emotion play when analyzing financial performance?
- Are the results of some types of ratio analysis less open to interpretation than others?
- To what extent are the methods used to gain knowledge in investment appraisal “scientific”?
- What assumptions underlie the techniques used when budgeting?