Mick is deciding whether to purchase Business A or Business B and has received the following information - HSC - SSCE Business Studies - Question 15 - 2017 - Paper 1

To make an informed decision between Business A and Business B, Mick should consider comparative ratio analysis. This approach allows Mick to evaluate businesses based on relevant financial metrics that indicate performance in relation to their assets and sales.

Explanation

Comparative ratio analysis involves calculating key financial ratios, such as:

1. Return on Assets (ROA): This ratio indicates how efficiently a company is using its assets to generate earnings. It can be calculated as: ext{ROA} = rac{ ext{Net Income}}{ ext{Total Assets}}

2. Asset Turnover Ratio: This ratio measures how efficiently a company utilizes its assets to generate sales. It is calculated as: ext{Asset Turnover} = rac{ ext{Total Sales}}{ ext{Total Assets}}

By analyzing these ratios, Mick can gain insight into the profitability and operational efficiency of each business, thus leading to a more informed purchasing decision.