The gross margin basically shows the profitability of the company’s products. Gross margin does not include operating expenses only cost of goods sold is included. Black Sea plc’s gross profit margins decreased from 49.4% to 47.4%. However in both years they were lesser than the Industry’s Gross profit margin. The decrease in gross profit margin is because although the gross profit and net sales increased, but they increased in different proportions. The net sales increased in a larger proportion than the gross profit.
The operating profit margin decreased as well. The industry’s operating profit margin was 19% and the company’s margins were less in both years. This is due to the fact that the operating expenses increased by more than 400 percent in 2010 than the previous year. Therefore the operating profit did not increase significantly to increase the operating profit margin of 2010.
In both the years the return on capital employed of BlackSea was around 10% lesser than the return on capital employed of the industry. However the return on capital employed increased in 2010. This is due to the fact that the operating profit increased and so did the total assets. The current liabilities also increased by 300 which had an increasing effect on the return on capital employed. Therefore the business was more efficient and profitable in 2010 than in 2009.
The return on assets increased in 2010. This is because the percentage increase of operating income was more than the percentage increase of average total assets. This suggests that the business was more profitable as it returned more profit on assets and assets were managed more effectively; land and buildings were purchased, inventories increased and so did bank balance and trade recieveables.