Profits dive and put pressure on liquidity - the Distress Monitor

This is a fantastic resource for colleagues who want to encourage their AS/A2 students to get to grips with some real-life business data and issues.

The Baker Tilly SME Distress Monitor is the resource. I liken it to one of those life support machines you see bleeping away on Casualty or Holby City. Except that the monitor is wired up to hundreds of living, breathing medium-sized businesses in the UK.

The monitor covers the financial performance of businesses with annual turnover of between £5m-£25m.

So how is the financial health of this crucial sector? Print this one-page report out for students and ask them to analyse the data, picking out the key features.

You ought to be given some fairly substantial points from the students who read the page carefully. There will be plenty of scope for follow-up questions and discussion.

For example:

• A high proportion (25%) of businesses suffered a drop of more than a half in their profit before tax

• Significant reduction in firm profitability has implications for their finance (retained profit as the most important source of finance)

• One in every four UK SMEs has a current ratio below 1 which indicates insufficient resources to meet their immediate debt repayment

...but, the number of administrations has not risen significantly.