In our case, the increase in value could mean that efficiency of sales, in relation with the inventory, has increased (company's inventories are maintained at a lower level than in 2005). D2. The Assets to sales ratio stands for the total investment used to generate a certain level of sales. Extreme values can be explained in different methods: an abnormally high percentage may indicate that a company is not being aggressive enough in its sales efforts, or that its assets are not being used at the maximum level of efficiency. A low ratio may indicate that an enterprise is selling more than can be safely covered by its assets, risking to maintain an inferior level of inventory, which may also negatively affect the company's activity. The Assets to Sales ratio is computed by dividing the total assets to the total sales. In 2006 the value of the assets represented 90% of the sales, while in 2005 this percentage was only 63%. This situation can be interpreted by the fact that BSkyB continued its investment policy, so acquiring new fixed and current assets, at a higher pace than the increase in sales. Probably the company realized that the competitive environment of this field urges the players to make important investments in order to maintain, or improve market share.

E. Financial Leverage ratio: offer an indication of the long-term solvency of the company. This ratios, as contrary to the liquidity ones, measure the company's ability to observe its long time obligations - for example a bank may want to know what is BSkyB capacity to pay up a loan, for which the company may need to design and launch a new satellite for its program broadcasting. In my opinion this is a very important indicator for the long-term development of the enterprise, because investments are an essential step in improvement of services, reducing costs, acquiring new clients and improving company's profits. Two of the most important types of these financial ratios are Debt Ratios and Debt-to-Equity ratio. Let us take them one at a time.

E1. Debt Ratio. Computed by the division of total liabilities over total assets, this indicator shows the percentage coverage of debts by assets. For example if the company were in a situation that it could not pay its loans, for different reasons, the banks and financial institution would need to evaluate the enterprise's assets. If the level of the ratio is higher than 1, then this should be an incentive for the bank to offer the loan to BSkyB Company, which may need the funds to continue its development and investment policy. The leverage level of the company in 2006 was 97%, while in 2005 it total liabilities represented 92%. This situation could be translated by the fact that more long-term liabilities of BSkyB are covered by total assets- fixed and current, so the company may obtain credits and loans with more favourable conditions - existence of a grace period, lower interest rate and a lower level of documents required.

E2. Debt-to-Equity. The Social capital can be another source for covering the company's debts. It the value of the assets is inferior to the value of the liabilities, this means that the creditors must settle the obligations with company's shareholders. This indicator may come in handy in here, due to the fact that it exactly indicates the percentage of total liabilities which can be paid with shareholder's contributions. The formula for this financial ratio is the following: Total debt divided by Total Equity. In the BSkyB case, the following figures appear for the observation years: 3.4% in 2006 as compared to 8.8% in 2005. This important increase in the ratio can be explained as the Social capital of the enterprise had decreased in only one year from 187 to 121, due to possible company's buy back policies (BSkyB may require to develop an investment, and needed funds for this thing. The cheapest way to do that is by increasing the social capital, with buy-back shares, on which the company engages to offer these shares to interested investors, with the buying-back promise after a certain period of time - usually one year). However, this decrease does not negatively influences the company's financial...

So it is unlikely that the company end up in a situation of not being able to cover its debts by total assets, and must address its shareholders to do just that.
4). Interpretation of the financial indicators for the BSkyB corporation

The financial performance of the company is closely monitored by different stakeholders, as we could mention the company's board, banks, current and future investors and also suppliers of the company. Each stakeholder wants to eliminate risk in his decision, and this can be done by strictly monitoring this indicators. For example, the company's management must pay attention to the efficiency of its activity, in order to reduce costs and improve for example the company's revenues, which represent in our case the amount of money paid by television subscribers. The banks evaluate the liquidity and solvency capacities of the enterprise in order to discover the if BSkyB can pay its loans and credits, and reduce in this way the default risk. These financial ratios are crucial for investors, as their savings are closely tied to the company's performances. So they closely watch the profitability ratios, and trying to maximize their return on investment, while reducing the risk to minimum level. Finally, the suppliers are interested in the liquidity ratios as they want to find out if the company can pay its bills, in the amounts stipulated in the contracts and on the date mentioned in those agreements.

Discussing the strengths and weaknesses of the company in terms of financial indicators, we observed that BSkyB offers a proper liquidity level (well above the average 1.27 as compared to 0.8). This will enable the company to receive discounts from suppliers for payments made on time, as the company can provide an excellent amount of current assets to pay up its current liabilities. The profitability of the company is expressed by the excellent figures presented in the financial statements, so investors must congratulate themselves for putting their money into this particular company. With a ratio of 4 to 1, each dollar invested in the company is translated by a return of four dollars, meaning the company's decisions, regarding investments, operations, policies had met their objectives. Also the company is able to cover its total liabilities in 97% with their total assets. This is just a safety measure for the banks in order to perceive the company's financial leverage, and determine whether it can contract a new loan. The company management and suppliers must look for the solvency ratios, as they indicate average results, due to the fact that Net Income over Long-term obligation ratios does not comply with their expectations. In this case, the huge investments required in enhancing the quality of transmissions, acquiring new channels, merging with a competitor, requires time, but especially important funds, which can be obtained through long-term credits. It seems that the Net Income does represent only a tiny proportion of these long-term liabilities, and maybe the company should find other financing alternatives (increasing the social capital), better use the corporative resources and find other revenues sources- for example, launching a production unit for complementary products (universal remote controls which can be used with the decoding package for the satellite dish, but also with the garage switch, microwave button or alarm triggering system). Also the Acquisition Department should pay more attention to the inventories the company decides to holds for a certain period of time. This decision is very sensible, as it was demonstrated above. Neither a lower nor a higher level of inventory does not bring benefits to the company, for different reasons.

Bibliography

1)Company's official web site - official financial statements, http://phx.corporate-ir.net/phoenix.zhtml?c=104016&p=irol-corphome

2) Joanne Oatts, Media Correspondent, 8th of February 2007, http://www.digitalspy.co.uk/digitaltv/a42523/sky-to-launch-new-dtt-service.html

3) Reuters…