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Describe differences in approach between the two businesses

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Mumba and Chikosi are both engaged in retailing as soles traders, but seem to take a different approach to trading. The following information has been calculated in respect of both businesses. Ratio Mumba Chikosi Current ratio 2:1 1.5:1 Acid test ratio 1.7:1 0.7:1 Return on capital employed 20% 12% Trade receivables settlement period 63 days 21 days Trade payables settlement period 58 days 45 days Gross profit margin 40% 15% Operating profit margin 10% 10% Inventories turnover period 52 days 25 days

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Question (a) Describe what this information indicates about the differences in approach between the two businesses.

Question (b) If one of them prides itself on personal service, and one of them on competitive prices. Which business do you think engages in personal service and which one engages on competitive prices? Give reasons for your answer?

Reference no: EM132526053

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