Hilton Publishing and Jordan Publishing have identical debt-equity ratios and profit margins. However, Hilton's ROA is higher than Jordan's. Therefore, it must be true that:
A) Hilton has a lower total asset turnover ratio.
B) Jordan's ROE is higher than Hilton's.
C) Hilton uses its assets more efficiently to generate sales.
D) Hilton's operating efficiency is higher than Jordan's.
E) Hilton has a lower investment in total assets than Jordan does.

Question

Quizplus · Accepted Answer

DSince Hilton's Return on Assets (ROA) is higher than Jordan's, it indicates that Hilton is more efficient in using its assets to generate earnings. This efficiency can be attributed to either a higher total asset turnover ratio (C), which means Hilton generates more sales per unit of asset, or higher operating efficiency (D), which implies Hilton is better at converting its operations into profits. The other options are either incorrect or not directly related to the information given.

Hilton Publishing and Jordan Publishing Have Identical Debt-Equity Ratios and Profit