This section of the IB Business Management syllabus examines efficiency ratio analysis for financial strategic analysis (for HL students only). It requires students to understand the purpose and use of financial ratios, extending their understanding of profitability and liquidity ratios previously discussed in Unit 3.5 Profitability and liquidity ratio analysis. HL students also need to examine the various strategies that can be used to improve a firm's efficiency ratios.

Ratio analysis is a financial analysis tool used in the interpretation and assessment of an organization's final accounts, i.e. the firm's financial statements, consisting of the balance sheet and income statement (profit and loss account). Such analysis helps decision-makers and other stakeholders to evaluate a business organization's financial performance by exposing various financial strengths and weaknesses. Finally, ratio analysis helps to make meaningful historical and inter-firm comparisons by analysing past data of the business, and those of other businesses in the same (or even different) industries for benchmarking purposes.

The learning outcomes (or assessment objectives) for this section of the IB Business Management syllabus are:

• The following further efficiency ratios (AO2, AO4):

1. Stock turnover

2. Debtor days

3. Creditor days

4. Gearing ratio

• Possible strategies to improve these ratios (AO3)

• Insolvency versus bankruptcy (AO2)

 Teacher only box

Note to teachers

Please note the following points about this section of the new syllabus:

• In the February 2022 publication of the new guide, Unit 3.6 was titled "Debt/equity ratio analysis (HL only)". This was later changed to "Efficiency ratio analysis (HL only)" in the May 2022 updated publication of the new IB guide.

• Insolvency versus bankruptcy (AO2) has been added to the new syllabus.

Please be aware of the above points if/when using resources for the previous syllabus, such as past IB examination papers and mark schemes.