Delicious Limited competes in the fast food industry with Scrumptious Limited. Delicious embarked on a major expansion in 2018, borrowing a large amount of money and acquiring a small competitor. The acquisition doubled the number of restaurants that Delicious has. Scrumptious, on the other hand, took a more conservative approach and did not buy any new assets, focusing instead on a strategy of making existing operations more efficient.

Data for the two companies are provided below (in thousands of dollars):

Instructions
(a) Calculate the
(1) Profit margin,
(2) Asset turnover, and
(3) Return on assets ratios for each company in 2017 and 2018.
(b) Provide an explanation for the year-over-year changes in the ratios calculated in part P9.12A(a).

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2018 2017 2016 Delicious Total assets $2,000 $1,10o $1,000 Net sales 3,100 1,500 1,600 Net income 350 150 140 uus Total assets 8oo 9001,000 Net sales 1, Net income 900 1,700 2,000 180 200 210