Active learning ideas
Investment ratios allow students to evaluate a company from the perspective of a shareholder or potential investor. This topic covers Earnings Per Share (EPS), Price-Earnings (P/E) Ratio, and Dividend Yield. In Singapore, where many individuals participate in the stock market, these ratios are essential for making informed investment decisions. Students learn how market price relates to accounting earnings and how to interpret investor sentiment.
Activity 01
Students are given a virtual budget to 'invest' in three SGX-listed companies. They must calculate the P/E ratios and dividend yields for their choices and justify their portfolio strategy based on these investment ratios.
What makes a cost relevant to a specific decision?
Activity 02
Students are shown two companies: one with a P/E of 10 and another with a P/E of 30. They individually brainstorm why the market might value the second company more highly, then pair up to share their theories on growth expectations.
How do opportunity costs factor into the make-or-buy decision?
Activity 03
Groups compare the dividend yields of a 'Growth' stock (like a tech firm) and a 'Value' stock (like a REIT). They discuss why different types of investors might prefer one over the other and present their findings.
When should a company accept a special order at a lower price?
A few notes on teaching this unit
Watch Out for These Misconceptions
A low P/E ratio always means a stock is a 'bargain'.
A low P/E could also mean the market expects the company's profits to decline in the future. Peer discussion of 'value traps' helps students understand that ratios must be interpreted alongside qualitative factors and industry trends.
Earnings Per Share (EPS) is the same as the dividend paid per share.
EPS is the total profit attributable to each share, while the dividend is only the portion of that profit actually paid out to shareholders. Using a 'profit pie' visual helps students see that some earnings are kept as retained earnings for future growth.
Methods used in this brief
Cost Concepts and Cost-Volume-Profit Analysis
Introduces cost behavior, fixed and variable costs, and break-even analysis. Students use CVP analysis to make short-term business decisions.
8 methodologies
Absorption and Variable Costing
Compares absorption costing with variable costing methods. Students evaluate how inventory valuation impacts reported profitability under each method.
8 methodologies