Good Sandell Arnold Report Example

Report of Sandell Arnold

Introduction
Sandell Arnold is a merchandising and supplier of construction and building material. The company is operating in the industry for past 40 years. The company has been registered on the London Stock Exchange and is public limited company. The company seems to raise capital to improve its sale strategy and enhance its expansion in European markets.

Executive summary

The present case study analyzes financial statement of Sandell Aronld. The main focus of the report is evaluated financial and nonfinancial aspects of the company. Therefore, auditing and corporate governance practices of the company are analyzed. In addition, financial statements of the company are analyzed to evaluate financial positioning of the company. Furthermore, key ratios of the company are discussed to provide an overview financial performance of the company.

Purpose and a key feature of Sandell’s financial statements

The main purpose of the financial statements of Sandell Arnold is to provide financial information to the internal and external users of the organization. Since, the company is now listed on AEI the company seeks to raise capital to expand its operations. The key features of the financial statement of the company are to provide an overview about the financial performance and positioning of the company. The company aims to improve its profitability, declare new dividend policy for its shareholders, expansion of the company in the new markets in Western Europe and raise capital for its infrastructure.

Auditing and Corporate Governance

On the basis of the discussion of Sandell with the external auditors, it can be determined that the case of 30 million that has been claimed by one of its major customer House Builder for supplying hazardous substance. The company has not presented the disputed amount in the financial statements of the company that can lead the company to fall into bankruptcy. The reason that the external auditors will provide Sandell the clean audit report is because it would allow the company to be clear and transparent about its operations.
The reason, that the external auditor has changed their opinion, is because the company has greater potential to overcome the losses. The reason that the company prefers clean audit report is that it will allow the company o sustains its image and reputation in the industry. Though several company encounter losses, but the companies with greater potential and aggressive sales attract more investors. It is because the performance of the company is tremendous that can be offset through raising capital or selling its stock to public or organizations. Keeping in view, the performance and aggressive sales of the company the external auditors refused to give unclean audit report to the Sandell as it would provide the clear picture of the company. However, it can eventually have a negative impact on the external users it is because the disclosure of the issue can also cast adverse impact on the goodwill of the company. The supply of the hazardous substances and claim of its suppliers can lead the negative impact on the image of the company. But if the company would publish unclean reports it would cast a negative impact on the image of the company. Due to which the company would face severe losses and will be remarked as distrustful and blacklisted company.
In case, if the rumination of the company is approved by the board of the directors it would lead to discrimination among the management and directors. It is because providing remuneration to the directors and not to the employee would reflect discriminatory and unethical practice of the company. If the company incorporates transparency in its practices, it will allow the company to develop the strong image. In addition, the justified distribution and raise in the salaries of the company would improve overall efficiency of the company.

Interpretation of Income Statement

The Net margin of the company indicates that there has been increase in the net margin of the company during the period 2013-2012. The financial statement of the company shows that there has been increase in the revenues of the company that has significantly impacted net margin of the company. The net margin is the determinate of the operational efficiency of the company. In addition, it reflects effective pricing strategy of the company that has eventually improved overall profitability of the company. Moreover, the company’s sale volume has increase that has significantly improved the profits of the company. In addition, the major contribution in the net margin of the company can be noted by the significant decline in the cost of sales that reflect that the company is increasing its profit by lowering the costs of goods.

Interpretation of Statement of financial position and statement of cash flow

The increase in the operating profits of the company is 22 million, whereas net cash flow from the operating activities of the company is only 2 million. The cash flow statement of the company show that the credit sales of the company has increase that has eventually decline the cash flow of the company.
In addition, it can be noted that the interest and income taxes paid of the company has significantly increase. It indicates that the company has acquired debt due to which the interest expenses of the company are increases. Moreover, the company is paying off dividends to its shareholders that have suppressed the operating cash flows of the company.
It can be determined from the gearing ratio of the company that the increase in the debt and shareholder equity of the company has increased during the period. It has significantly increased the solvency of the company. Moreover, the interest coverage ratio of the company improved during the period. The reason for the improvement in the interest coverage ratio can be noted because of the increase in the loans and increase in the taxations of the company.

References

Sinha, A., 2009. Financial Statement Analysis. London: PHI learning.