Syllabus: SQA - Higher Course Spec Business Management
Module: Management of Finance
Lesson: Financial Statements

Introduction

In the SQA Higher Business Management course, the “Management of Finance – Financial Statements” topic is a vital part of understanding how organisations track performance, inform decisions, and meet legal responsibilities. It’s directly aligned with the SQA Higher specification under the Management of Finance unit and contributes to students’ wider financial literacy and economic awareness.

Whether you’re supporting learners to interpret income statements or draw meaning from balance sheets, this area develops both numeracy and decision-making—skills students will carry beyond the classroom. It’s an opportunity to bring business to life through real data and practical analysis.

Key Concepts

According to the SQA Higher Business Management specification, students must understand:

• Purpose of financial statements: Why businesses create income statements and statements of financial position (balance sheets).

• Key terminology: Revenue, expenses, gross profit, profit for the year, current assets/liabilities, non-current assets/liabilities, and equity.

• Interpretation of financial statements: How to assess business performance using these documents.

• Stakeholder use: How different stakeholders (e.g. owners, investors, creditors) use financial information to make decisions.

• Simple ratio analysis: Gross profit percentage, profit for the year percentage, and working capital ratio, with an emphasis on interpreting results rather than complex calculation.

• Limitations of financial information: What financial statements don’t show, such as market trends or employee morale.

Real-World Relevance

Financial statements aren’t abstract documents—they’re living reflections of a business’s health. For example, students can examine real-world income statements from companies like Greggs or ASOS to compare profitability year-on-year. Looking at the collapse of retailers like Wilko offers a chance to understand how poor cash flow, rising liabilities, or over-leveraging can lead to business failure.

A school-based mini-case study could involve a simulated tuck shop or prom committee, helping students track spending, revenue, and create basic statements using spreadsheets.

How It’s Assessed

Assessment of this topic includes both the question paper (exam) and the assignment:

• In the question paper, expect structured questions using financial data. Students may need to:

  • Interpret figures from an income statement or balance sheet.

  • Calculate and comment on ratios.

  • Justify decisions using financial data (e.g. whether a business is in a good financial position).

• Command words to focus on:

  • Describe: Identify features of a financial document.

  • Explain: Show understanding of financial terms and their impact.

  • Analyse: Break down financial performance and comment on implications.

  • Justify: Recommend actions based on financial data.

  • Compare: Assess financial change over time or between businesses.

Enterprise Skills Integration

This topic builds essential enterprise skills:

• Problem-solving: Identifying financial challenges (e.g. low liquidity) and suggesting practical responses.

• Decision-making: Evaluating financial performance to support choices on investment, budgeting, or expansion.

• Numeracy and data literacy: Reading and interpreting financial documents with accuracy.

• Communication: Explaining financial information clearly—whether pitching a business case or advising stakeholders.

Practical classroom tasks like creating basic statements for a student-run project or using budgeting apps can reinforce these skills.

Careers Links

Understanding financial statements opens the door to a range of career paths. This unit links directly to Gatsby Benchmark 4 (linking curriculum to careers) and Benchmark 5 (encounters with employers):

• Careers it supports:

  • Finance and accounting (e.g. trainee accountant, payroll assistant)

  • Business management

  • Retail and hospitality leadership

  • Entrepreneurship and self-employment

  • Public sector roles (e.g. budgeting in education or NHS finance)

Consider linking to employer encounters—like inviting a local accountant or business manager to walk through a real statement—or using online tools such as Barclays LifeSkills for budgeting simulations.

Teaching Notes

Top tips for delivery:

• Start with familiar examples: a household budget or school prom event.

• Use spreadsheets for hands-on statement creation—great for digital skills too.

• Teach ratios through visual examples (e.g. bar charts comparing GP% year to year).

• Highlight limitations—bring in qualitative factors like reputation, customer loyalty, or staff morale.

Common pitfalls:

• Students confusing income statements and balance sheets—use side-by-side comparisons.

• Misunderstanding liquidity vs profitability—regularly revisit this distinction.

• Overcomplicating ratios—stick to the syllabus-specified formulas and focus on interpretation, not advanced maths.

Extension ideas:

• Analyse a real business’s accounts and draft a brief report for stakeholders.

• Role-play: assign students stakeholder roles and debate a decision based on financial data.

• Simulate a business failure due to poor financial planning, and ask students to recommend improvements.