Some key financial data and ratios are reported in the table below for Hemmingway

Hotels and for its competitor, Fitzgerald Hotels:

Ratio Hemmingway Hotels Fitzgerald Hotels

Profit margin 4% 3%
ROA 9% 8%
Total assets $2.0 billion $1.5 billion BEP 20% 20%
ROE 18% 24%

On the basis of the information above, which of the following statements is

most correct?

a. Hemmingway has a higher total assets turnover than Fitzgerald.

b. Hemmingway has a higher debt ratio than Fitzgerald.
c. Hemmingway has higher net income than Fitzgerald.
d. Statements a and b are correct.
e. All of the statements above are correct.

Chapter 3 - Page 11
Multiple Choice: Problems
Easy:
Financial statement analysis Answer: a Diff: E
38. Russell Securities has $100 million in total assets and its corporate tax
rate is 40 percent. The company recently reported that its basic earning
power (BEP) ratio was 15 percent and its return on assets (ROA) was 9
percent. What was the company’s interest expense?

a. $ 0
b. $ 2,000,000
c. $ 6,000,000
d. $15,000,000
e. $18,000,000

Market price per share Answer: b Diff: E

39. You are given the following information: Stockholders’ equity = $1,250;
price/earnings ratio = 5; shares outstanding = 25; and market/book ratio =
1.5. Calculate the market price of a share of the company’s stock.

a. $ 33.33
b. $ 75.00
c. $ 10.00
d. $166.67
e. $133.32