Annotate like crazy.

I don’t tell students to annotate their exam questions. I show them how to annotate their exam questions.

While we’re in class, before we hit the stress of the exam halls, I want students to put a lot of effort into their annotations. They’ll get quicker over time. They’ll need less annotating as their skills improve and the range of questions become more familiar.

But, at the start, they’ve got to annotate like crazy.

Let me show you what I mean.

Here is the original question taken from the 2020 NSW Business Studies Higher School Certificate (HSC) exam. It’s a pretty typical Business Studies financial ratios question. Lots of opportunities for confusion with all the numbers and formulas here.

Here’s how I would annotate the questions as part of my answer technique. You can see the detail I’ve included in trying to work though the elements of the question.

• GP - gross profit

• NP - net profit

• GPR - gross profit ratio

• NPR - net profit ratio

In my experience, this can be a frustrating process for students. They don’t annotate, get the correct answer, question the need for annotations in the first place. But what if the question’s especially tricky? What if they’re really nervous?

Students should have a process — a routine — that they turn to for exam questions that lessen the chances for confusion and mistakes. In terms of tying it all together, here are some principles students should keep in mind. As I say in the last point, “questions change, but the process stays the same”.

Worked examples to financial ratios questions

I’m more interested in students’ processes than their answers.

To help with this, in my classroom, I try and extensively model how I would answer questions — particularly financial ratio questions — so that students can replicate my thinking, rather than focus on the correct answer.

The benefit here is that it doesn’t really matter what students get asked. If they apply a good quality process, they’ll be in a great position for success.

Here are some past HSC questions on Finance. I’ve sourced them from NESA. I’ve recorded two videos (below) that take students through my precise process for answering each question. You can play this however best you see fit — have the students try and answer them, and then compare their process with the video; have students watch part one and then attempt part two on their own. Whatever works best.

Process is the focus.

But this takes all too long!

One criticism you might get from students is how this all takes too long in the context of an exam.

I don’t disagree. In the HSC exam, I tell students to only spend around 1-2 minutes per multi choice question.

The point is that students will get faster. They'll recognise the patterns of questions and the connections will form more quickly. They'll only need to do an abridged process in the exam setting.

But it takes time to develop great habits and an excellent process. So, I push them to take all the steps even as they protest.

Trust the process.

Starting financial ratio analysis (a little less painfully)

Business Studies is a largely accessible subject for students. Except when it comes to the topic of Finance. This looms large as an insurmountable challenge for many students.

I can understand why students don’t love it. Finance has connotations of complex numbers and maths. It also involves higher order thinking — using the results of the financial ratios to analyse businesses and offer strategies to improve.

Given all this, where should teachers even start?

My approach is to try and get to the heart of why we use financial ratios, which is to tell an accurate story about a business.

First, take a selfie.

Success comes easily after that.

Students often evaluate businesses based on a couple of quick observations and snap judgements. It seems ‘good’ or ‘bad’, but they do not paint a comprehensive picture of the business as it stands.

Financial ratios take the guesswork out of things. They give people the numbers and the evidence to make informed decisions about the true state of a business, encompassing elements such as:

• how good it is at earning profit

• the sustainability of its debt levels

• how well it uses its expenses to drive sales.

So. This is my message to students at the start of the finance topic: we use ratios to tell an accurate story about a business. Moreover, we use a range of ratios to compare businesses on a range of measures and figure out where best to invest our money, or the best strategies to implement to improve operations.

I’ve also created a video, primarily targeted for students, to introduce financial ratios. This could also help in giving students a little more confidence.

Start HERE with financial ratios.