Essay
Business Financial Performance level 3 M3 UNIT 2
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Analyse reasons for the performance of a selected business as illustrated by the use of key financial ratios.
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I will be analysing reasons for the performance of ASDA as illustrated by the use of key financial ratios.In terms of net profit as a % of sales this means that for every amount ASDA makes in sales what will be
left over as net profit when all the expenses have been subtracted. The percentage ASDA has when the
net profit has been divided by sales and times by a 100 is 20.4%.As ASDA is a well-known supermarket
and second in the market share this shows they make many sales however when working out their net
profit percentage which is 20.4% it shows that their expenses are high such as their wages, rent,
electricity etc. When these costs are high it leaves the business with less profit which is why the
percentage is low, so in terms of this percentage ASDAS performance is not so good as they could be
doing better if they reduce the amount of their costs such as making some staff redundant and finding
cheaper shops to rent and only using electricity when needed which was in 2015.However in 2014 the
net profit percentage was 99% and decreased rapidly to 20% and this is a big decrease which shows
ASDA have opened more stores which will require rent payment and their expenses are too high. ASDA
will need to lower their expenses and make more sales to get back to that 2014 percentage. ASDAs net
profit in 2015 is extremely low in comparison to 2014, this show’s ASDA made very low sales and may be
their products decreased in quality and their customers went to competitors. Also may be they did no
advertise as much so customers did not see anything new from them. Also their expenses must have
been very high too which means they will need to lower their expenses a lot such as finding cheaper
suppliers and building trust with them to get discount. Also making good investments can leave ASDA
with a higher net profit.
2015
Net profit= $4.57bn.
Sales= 22.4bn
22,400,000,000
4,570,000,000
Net profit percentage: 20.4%
2014
Sales= 476,294
Net profit: 473,076
Net profit percentage: 99%
2015
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