Business A and business B are both retailers, but seem to take a different approach to...

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Finance

Business A and business B are both retailers, but seem to take adifferent approach to this trade according to the informationavailable, which consists of a table of ratios: Required: 1)Discuss what this information indicates about the differences ineach business’s approach. 2) If one of them prides itself onpersonal service and the other on competitive prices, which do youthink is which, and why? 3) Based on the given information, whichbusiness tends to require more external financing and what types ofexternal financing you would recommend. Ratio Business A Business BReturn on capital employed 20% 17% Return on owners' equity 30% 18%Average settlement period for accounts receivable 63 days 21 daysAverage settlement period for accounts payable 50 days 45 daysGross profit percentage 40% 15% Profit percentage 10% 10% Inventoryturnover period 52 days 25 days

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1 Business A has a much higher ROCE and ROE This indicates that Business A focuses more on profitability and efficient use of capital Business A has a much higher inventory turnover ratio This See Answer

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Business A and business B are both retailers, but seem to take adifferent approach to this trade according to the informationavailable, which consists of a table of ratios: Required: 1)Discuss what this information indicates about the differences ineach business’s approach. 2) If one of them prides itself onpersonal service and the other on competitive prices, which do youthink is which, and why? 3) Based on the given information, whichbusiness tends to require more external financing and what types ofexternal financing you would recommend. Ratio Business A Business BReturn on capital employed 20% 17% Return on owners' equity 30% 18%Average settlement period for accounts receivable 63 days 21 daysAverage settlement period for accounts payable 50 days 45 daysGross profit percentage 40% 15% Profit percentage 10% 10% Inventoryturnover period 52 days 25 days