Methuselah Ltd and Peter Pan Ltd are two companies operating in the mineral extraction industry. Methuselah Ltd is a well-established company while Peter Pan Ltd is a relative newcomer to the industry. The mineral extraction industry has experienced a rapid level of development in recent years particularly in relation to the increased sophistication of highly expensive exploration equipment.

Recently published financial accounts of the two companies suggest that Methuselah Ltd is earning a much higher rate of return on invested capital than Peter Pan Ltd . Summarised accounts of the two companies are given below.

What possible reasons are there for the difference in performance of the two companies?

Land and buildings Plant and equipment Net current assets Shareholders' funds Debenture capital Balance Sheets Methuselah Ltd

£m 25 45 30 100 60 40 100 Peter Pan Ltd

£m 35 25 15 75 55 20 75 Peter Pan Ltd

£m 25 II 14 2

12 3

9 Profit and Loss Accounts Methuselah Ltd

£m 42 16 26 4

22 6

16 Revenues Less operating expenses Operating profits Interest expenses Net profit before tax Corporation tax payable Profit after tax