Question 2 Compare and comment on the ratios. a) Using the Return on Capital Employed ratio you have calculated, compare and comment on the performance of the two companies. b) Using your calculations, compare and comment on the Gross Profit margin of the two companies. c) Using your calculations, compare and comment on the capital gearing of the two companies a) Using the Return on Capital Employed ratio you have calculated, compare and comment on the performance of the two companies. ROCE - Flowers are performing much better in terms of return on capital employed with a figure of 80% more than plants. This indicates Flowers are much more efficient at using their capital to generate profit. b) Using your calculations, compare and comment on the Gross Profit margin of the two companies. Gross profit for the two companies is similar, the gross profit for plants is 0.74% higher than Flowers. This indicates that for Plants 76P of every pound is gross profit and 75p for Flowers. The ratios may indicate that Plants are spending slightly less (as a percentage) on their direct costs than Flowers are. c) Using your calculations, compare and comment on the capital gearing of the two companies Capital Gearing - Plants have a much lower gearing figure than Flowers - there is a difference of 31% Plants gearing may indicate a safe financial position with less reliance on banks compared to Flowers. Over 50% of Flowers finance is generated from long term loans which may be a problem if interest rates increase. Doubtful Debts: are those debts which a business or individual is unlikely to be able to collect. The reasons for potential non-payment can include disputes over supply, or the financial problems faced by the customer. Ordinary share: are shares in a company that are owned by shareholders who have invested in the company. These shares normally carry voting rights but the shareholder is not guaranteed a dividend.