Amsterdam Ltd and Berlin Ltd are both engaged in retailing, but they seem to take a different approach to it according to the following information:
|
Ratio
|
Amsterdam Ltd
|
Berlin Ltd
|
|
Return on capital employed (ROCE)
|
20%
|
17%
|
|
Return on ordinary shareholders" funds (ROSF)
|
30%
|
18%
|
|
Average settlement period for trade receivables
|
63 days
|
21 days
|
|
Average settlement period for trade payables
|
50 days
|
45 days
|
|
Gross profit margin
|
40%
|
15%
|
|
Operating profit margin
|
10%
|
10%
|
|
Average inventories turnover period
|
52 days
|
25 days
|
Required :
Describe what this information indicates about the differences in approach between the two businesses. If one of them prides itself on personal service and one of them on competitive prices, which do you think is which and why?