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4 February, 00:29

Hilton's 2001 segment reporting note showed that Hotel Ownership has revenue of $1,886 million, operating income of $474 million, and assets of $4,925 million. Managing and Franchising had revenues of $120 million, operating income of $113 million, and assets of $680 million. This indicates that: a. Managing & Franchising s asset turnover ratio at 17.6% suggests inefficiency when compared to Hotel Ownership b. Managing & Franchising probably should be sold since the return operating return on sales is extremely low c. Hotel Ownership had an operating return on sales ratio below 2%, a possible red flag d. Hotel Ownership has a higher operating return on sales than Managing & Franchising

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  1. 4 February, 03:45
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    Option A is correct one.

    Managing & Franchising s asset turnover ratio at 17.6% suggests inefficiency when compared to Hotel Ownership

    Explanation:

    The ratio of the operating return on sales for hotel ownership is:

    474/1886 = 0.25

    The asset turn-over for hotel ownership is:

    1886/492.5 = 0.38 = 38%

    Now, for managing and franchising:

    The ratios are:

    Operating return to sales = 113 / 120 = 0.94

    Asset Turnover = 120/680 = 0.1765 = 17.65%.
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