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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.

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