Question
A) Shuwa Ltd and Mwe Ltd are both engaged in retailing , but they seem to take different approach. One of them prides itself on
A) Shuwa Ltd and Mwe Ltd are both engaged in retailing , but they seem to take different approach. One of them prides itself on personal service and the other on competitive prices. The following financial information relates to the two companies
Ratio Shuwa Ltd Mwe Ltd
1. ROCE 20% 17%
2. ROE 30% 18%
3. Average Settlement period for Receivables 63 days 21 days
4. Average Settlement period for Payables 50 days 45 days
5. Gross Profit Margin 40% 15%
6. Net Profit Margin 10% 10%
7. Inventories Turnover Period 52 days 25 days
Required
1) Using the information above , analyse the performance of the two companies and indicate which one prides on personal service and which one prides on competitive prices.
2) Discus four (4) weaknesses of financial ratio analysis as a tool for measuring company performance
B) Explain the purpose of each of three (3) primary source of financial information to a user of financial information
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