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Analysis of the enterprise > Summary - Pg. 167

a n a ly s i s o f t h e e n t e r p r i s e Summary Wingate'sreturnoncapitalemployed,whichisthekeyperformance measureoftheenterprise,hasbeendecliningdramaticallysincethe newmanagementtookcharge­althoughoperatingprofithasbeen growing,capitalemployedhasbeengrowingfaster. ThedeclineinROCEcanbeexplainedbyadeclineinbothreturnon salesandcapitalproductivity. ThefallinROSisduetoasteadydeclineingrossmargin,probably causedbythemanagement'sprice-cuttingpolicy.Thegross margindeclinehasbeenoffsettosomeextentbyareductionin administrationcosts(onlymadepossible,however,byinvestingin newbuildings). Capitalproductivityhasfallenbecausebothfixedassetsandworking capitalaregrowingfasterthansales. Thedisproportionateneedforadditionalworkingcapitalisbecause thecompanyisnotcollectingitsdebtsfromcustomersasquickly,is