Differences in approach between the two businesses

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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?

Reference no: EM13981343

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