Effectiveness of Reward and Appraisal System

INTRODUCTION TO
BUSINESS (TASK 3)

Table of Contents
MAIN BODY...................................................................................................................................3
1. Calculation of ratios................................................................................................................3
2. Extend to which shareholders of above company should be satisfied in accordance of
financial performance of year 2013 and 2014. ...........................................................................5
3. Different types of options which can be beneficial for above company in order to increase
profitability..................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES.................................................................................................................................9

INTRODUCTION
It is essential for companies to do proper financial analysis in order to take corrective
actions (Vogel, 2016). There are different types of techniques to do so. The project report is
based on British Sky Broadcasting company which supplies telephone and broadband services.
In the report financial performance of this company has been analyzed in terms of different ratios
and profitability. As well as some operations are suggested which may enhance the profitability.
MAIN BODY
1. Calculation of ratios.
(A). Gross profit- This can be defined as a type of profit which is earned by companies after
subtracting cost that is associated in manufacturing of products (Cucchiella, F., D’Adamo and
Gastaldi, 2015). The value of gross profit is presented in income statement. In the aspect of
above company, gross profit is mentioned below:
Particulars 2014 £M 2013 £M
Revenue 7632 7235
Less- Cost of sales 4616 4329
Gross profit 3016 2906
(I) Gross profit margin= Gross profit / Net sales x 100
2014 £M 2013 £M
Gross profit 3016 2906
Net sales 7632 7235
Calculation 3016/7632*100 2906/7235*100
Gross profit margin 39.52% 40.17%

(B) Operating profit- This can be defined as a type of profit which is earned from business
operations and activities before deducting amount of interest and tax. Below operating profit and
ratio is calculated of British Sky Broadcasting company in such manner:
Particulars 2014 £M 2013 £M
Gross profit 3016 2906
Less- Expenses 1741 1576
Operating profit 1275 1330
(ii) Operating profit margin= Operating profit / net sales * 100
2014 £M 2013 £M
Operating profit 1275 1330
Net sales 7632 7235
Calculation 1275/7632*100 1330/7235*100
Operating profit margin 16.70% 18.38%
(C) Profit for the year- The term profit is also known as financial gain. It can be defined as
difference between amount earned and spent in operating any activity in corporations (Bellos and
Tzivanidis, 2017). In regards to above company, herein underneath value of profit for year is
being calculated in such manner:
Particulars 2014 £M 2013 £M
Operating profit 1275 1330
Less- Tax 410 351