Two brewing companies that compete against each other are Northern Ale Ltd. (NAL) and Brew Right Inc. (BRI). The industry is experiencing a slump and each company has undertaken a different strategy to adapt to this new environment. NAL has adopted an expansion strategy by borrowing funds to purchase another company. This has boosted 2012 sales by 67% and 2012 profit by 47%, which the company CEO has mentioned in several press releases. BRI has decided to streamline operations and cut costs by looking at more efficient ways to operate the business. Data for the two companies are listed below in millions of dollars:

Instructions
(a) Calculate the profit margin, asset turnover, and return on asset ratios for each company in 2011 and 2012.
(b) Provide an explanation for the year-over-year changes in the ratios calculated in (a).
(c) Comment on which company has been more successful in executing its strategy.

Transcribed Image Text:

Total assets, 2012 Total assets, 2011 Total assets, 2010 Net sales, 2012 Net sales, 2011 Profit, 2012 Profit, 2011 NAL $2,500 1,100 1,000 BRI $1,100 1,050 1,000 1,800 1,500 1,500 220 150 150