Understanding Financial Statements (Summative Assignment) Essay

Understanding Financial Statements (Summative Assignment) - Essay Example This causes controversies within the organization (ii) The company should institute a good renumerations policy that will not bring controversies among the members. The policy should set the salary towards performance and there should be relation between them. The company should also have control systems that are geared to budgeting. The systems should propagate the vision ad mission of the organization of making profits. This will also deter other mechanisms that may hinder the profitability of the firm. The income statements of Sandrell Company have revealed the money that company generated, the money spent and the profit. The gross margin has increased from 10% to 19.4% from 2012 to 2013.Ordinarily the gross margin indicates the percentage of sales that is available for the expenses and also revealing the profits. Sandrell company has doubled its gross margin implying that it will have excessive money to spend on other expenses and get enough money to venture on the expansion process to the Western Europe. This upward trend of the gross margin is good since the company will not suffer insolvency and therefore the profitability of the company will rise. This is a positive impact on Sandells financial performance. Profit margin reveals the profits per sales after the deduction of expenses from the sales. The profit margin has increased. This upward trend in the profit margin is vital towards the future expansion Sandells Company. Higher profit margin is essential for the growth of the company for it gives the company more advantage over its competition. This gives it protection and the cushioning and prevents the company from collapsing. This is a positive impact on the financial performance of Sandells financial performance. This will enable the company to increase its market share in the long run and experience increased profitability. Return of Capital Employed (ROCE) is vital for