The Chairman of Kellads plc has called a board meeting to discuss the profit and loss account of their closest competitor, Ryevals plc. As HR director, Louise Gilroy is keen to show her fellow board members that she can interpret financial information. She has presented you with a copy of their income statement and has asked you for any assistance that you can give.

Ryevals plc Income statement Year ended 31st March 2005

2005 2004

m m

Revenue 1,300 1,000

Cost of sales (700) (450)

Gross profit 600 550

Distribution costs (100) (90)

Administration expenses (250) (180)

Operating profit 250 280

Interest payable (90) (75)

Profit before taxation 160 205

Taxation (50) (60)

Profit for the period 110 145

Write a memo to Louise analysing the above statements. The analysis should include the calculation of at least four ratios for each year and also highlight the key percentage movements.