Ratios reveal with regard to the operating approach

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Reference no: EM131005026

Gunge AG and Guntzel AG are both wholesale companies working in the same business segment. Given the information embedded in a number of ratios that we collected (see table below), they seem, however, to take a dif- ferent customer approach to their business.

*Ratio*	Gunge AG	Guntzel AG
Return on capital employed (ROCE)	14%	15%
Credit given	59 days	19 days
Credit obtained	50 days	47 days
Gross operating margin	42%	17%
Current ratio	2.4	1.3
Net operating margin	11%	11%
Days inventory outstanding	50 days	21 days

Required:

Explain what the ratios reveal with regard to the operating approach of Gunge AG and Guntzel AG. Take into account price competitiveness and customer service level.

Reference no: EM131005026

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