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Comment upon what the ratios indicate about each business

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Question - Given below is a range of financial ratios for two companies that both operate in the retail trade.

 

Rigby Ltd

Rialto Ltd

Gross profit %

60%

32%

Operating profit %

28%

10%

Asset turnover

0.88 times

2.2 times

ROCE

22%

22%

Current ratio

2.0:1

1.8:1

Quick ratio

1.2:1

0.4:1

Inventory turnover

4.8 times

10.3 times

Trade receivable collection period

41 days

3 days

Trade payables payment period

62 days

70 days

Gearing ratio

33%

50%

Interest cover ratio

16 times

5 times

Required -

1. Comment upon what the ratios indicate about each business.

2. One of the businesses is a supermarket and the other is a jeweller who supplies some goods on credit to long standing customers. Identify which business is a supermarket and which one is the jeweller.

Reference no: EM133095549

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