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Question 2: Selected information below is provided of two different companies competing in retail clothing industries: Bardot ($) Review ($) Sales revenue 2 000 000
Question 2: Selected information below is provided of two different companies competing in retail clothing industries:
| Bardot ($) | Review ($) |
Sales revenue | 2 000 000 | 1 000 000 |
Cost of sales | (1 500 000) | (400 000) |
Gross Profit | 500 000 | 600 000 |
Less: Expenses | (300 000) | (300 000) |
Profit | 200 000 | 300 000 |
Total assets | 500 000 | 400 000 |
Required
- Calculate Return on Asset, Profit Margin and Asset turnover ratio. Provide calculations and compare and interpret each ratio of Bardot and Review in terms of their relative comparative performance.
- From your calculation in part (a) explain the different business approaches the two companies have adopted.
- Explain how increasing the proportion of debt to assets can affect profitability ratios.
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