Cuthbert & Co is an established menswear retailer that also offers bespoke tailoring services. The company runs its operations from downtown Manhattan premises and offers an extremely high level of customer service. Cuthbert & Co have discerning customers who are willing to pay premium prices and take advantage of exceptional credit terms (60 days) that are available only after $75,000 of purchases have been made in one transaction or over a 12-month period.
Clothes NOW! is a recent start up created by two friends from a leading New York business school. The company specializes in low cost but fashionable menswear and has a limited range which is updated every quarter. Clothes NOW! operates from a self-service store on the edge of the city and has only 10 workers. Customers pay immediately for their clothes; however, regular customers who have spent at least $5,000 over a quarter can take advantage of a 30-day credit facility.
Required:
Explain how the accounting ratios of Cuthbert & Co and Clothes NOW! reflect their difference in business operations.