Question
Delicious Limited competes in the food industry with Scrumptious Limited. Delicious underwent a major expansion in 2021, borrowing a large amount of money and acquiring
Delicious Limited competes in the food industry with Scrumptious Limited. Delicious underwent a major expansion in 2021, 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 making existing operations more efficient. Data for the two companies are provided below (in thousands of dollars): 2021 2022 2023 Delicious Total assets $2,000 $1,100 $1,000 Sales 3,100 1,500 1,600 Net income 350 150 140 Scrumptious Total assets 800 900 1,000 Sales 1,900 1,700 2,000 Net income 180 200 210 Instructions a) Calculate the (1) profit margin; (2) asset turnover; and (3) return on assets ratio for each company in 2020 and 2021. (12 marks) b) Comment on which company has been more successful in executing its strategy. (2 marks) cument(s)
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