Question

Marriott International, Inc., and Hyatt Hotels Corporation are two major owners and managers of lodging and resort properties in the United States. Abstracted income statement information for the two companies is as follows for a recent year (in millions):

1		Marriott	Hyatt
2	Operating profit before other expenses and interest	$677.00	$39.00
3	Other income (expenses)	54.00	118.00
4	Interest expense	(180.00)	(54.00)
5	Income before income taxes	$551.00	$103.00
6	Income tax expense	93.00	37.00
7	Net income	$458.00	$66.00

Balance sheet information is as follows:

1		Marriott	Hyatt
2	Total liabilities	$7,398.00	$2,125.00
3	Total stockholders’ equity	1,585.00	5,118.00
4	Total liabilities and stockholders’ equity	$8,983.00	$7,243.00

The average liabilities, average stockholders’ equity, and average total assets are as follows:

	Marriott	Hyatt
Average total liabilities	$7,095	$2,132
Average total stockholders’ equity	1,364	5,067
Average total assets	8,458	7,199

1.	Determine the following ratios for both companies: A. Return on total assets, B. Return on stockholders’ equity, C. Times interest earned, D. Ratio of total liabilities to stockholders’ equity. Round ratios and percentages to one decimal place.
2.	Based on the information in (1), analyze and compare the two companies’ solvency and profitability.

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Questions

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Marriott International, Inc., and Hyatt Hotels Corporation are two major owners and managers of lodging and resort properties in the United States. Abstracted income statement information for the two companies is as follows for a recent year (in millions):

1		Marriott	Hyatt
2	Operating profit before other expenses and interest	$677.00	$39.00
3	Other income (expenses)	54.00	118.00
4	Interest expense	(180.00)	(54.00)
5	Income before income taxes	$551.00	$103.00
6	Income tax expense	93.00	37.00
7	Net income	$458.00	$66.00

Balance sheet information is as follows:

1		Marriott	Hyatt
2	Total liabilities	$7,398.00	$2,125.00
3	Total stockholders’ equity	1,585.00	5,118.00
4	Total liabilities and stockholders’ equity	$8,983.00	$7,243.00

The average liabilities, average stockholders’ equity, and average total assets are as follows:

	Marriott	Hyatt
Average total liabilities	$7,095	$2,132
Average total stockholders’ equity	1,364	5,067
Average total assets	8,458	7,199

1.	Determine the following ratios for both companies: A. Return on total assets, B. Return on stockholders’ equity, C. Times interest earned, D. Ratio of total liabilities to stockholders’ equity. Round ratios and percentages to one decimal place.
2.	Based on the information in (1), analyze and compare the two companies’ solvency and profitability.

X

Questions

Shaded cells have feedback.

Marriott International, Inc., and Hyatt Hotels Corporation are two major owners and managers of lodging and resort properties in the United States. Abstracted income statement information for the two companies is as follows for a recent year (in millions):

1		Marriott	Hyatt
2	Operating profit before other expenses and interest	$677.00	$39.00
3	Other income (expenses)	54.00	118.00
4	Interest expense	(180.00)	(54.00)
5	Income before income taxes	$551.00	$103.00
6	Income tax expense	93.00	37.00
7	Net income	$458.00	$66.00

Balance sheet information is as follows:

1		Marriott	Hyatt
2	Total liabilities	$7,398.00	$2,125.00
3	Total stockholders’ equity	1,585.00	5,118.00
4	Total liabilities and stockholders’ equity	$8,983.00	$7,243.00

The average liabilities, average stockholders’ equity, and average total assets are as follows:

	Marriott	Hyatt
Average total liabilities	$7,095	$2,132
Average total stockholders’ equity	1,364	5,067
Average total assets	8,458	7,199

1.	Determine the following ratios for both companies: A. Return on total assets, B. Return on stockholders’ equity, C. Times interest earned, D. Ratio of total liabilities to stockholders’ equity. Round ratios and percentages to one decimal place.
2.	Based on the information in (1), analyze and compare the two companies’ solvency and profitability.

X

Questions

Shaded cells have feedback.

Marriott International, Inc., and Hyatt Hotels Corporation are two major owners and managers of lodging and resort properties in the United States. Abstracted income statement information for the two companies is as follows for a recent year (in millions):

1		Marriott	Hyatt
2	Operating profit before other expenses and interest	$677.00	$39.00
3	Other income (expenses)	54.00	118.00
4	Interest expense	(180.00)	(54.00)
5	Income before income taxes	$551.00	$103.00
6	Income tax expense	93.00	37.00
7	Net income	$458.00	$66.00

Balance sheet information is as follows:

1		Marriott	Hyatt
2	Total liabilities	$7,398.00	$2,125.00
3	Total stockholders’ equity	1,585.00	5,118.00
4	Total liabilities and stockholders’ equity	$8,983.00	$7,243.00

The average liabilities, average stockholders’ equity, and average total assets are as follows:

	Marriott	Hyatt
Average total liabilities	$7,095	$2,132
Average total stockholders’ equity	1,364	5,067
Average total assets	8,458	7,199

1.	Determine the following ratios for both companies: A. Return on total assets, B. Return on stockholders’ equity, C. Times interest earned, D. Ratio of total liabilities to stockholders’ equity. Round ratios and percentages to one decimal place.
2.	Based on the information in (1), analyze and compare the two companies’ solvency and profitability.

X

Questions

Shaded cells have feedback.

Answer 1

PART 1. A,B,C,D

A.RETURN ON TOTAL ASSET measures earning before interest and taxes to its total asset.

return on total asset = EBIT / TOTAL ASSET

	MARRIOTT	HYATT
Earning before taxes	$551	$103
Add interest expense	$180	$54
earning before interest and taxes	731 [551+180]	157 [103+54]
Average Total assets	8458	7199
Return on total assets	8.6% [731/8458]	2.2% [157/7199]

B.RETURN ON STOCK HOLDER'S EQUITY is measure of financial performance of company .it is calculated by dividing net income after taxes with average shareholder's equity

	Marriott	Hyatt
net income after taxes	$458	$66
Average equity	1364	5067
return on equity	33.6% [458/1364]	1.3% [66/5067]

C.TIMES INTEREST EARNED RATIO measures company's ability to repay its debts. it is calculated by dividing earning before interest and taxes by interest expenses.

	MARRIOTT	HYATT
EARNING BEFORE INTEREST AND TAXES	731	157
INTEREST	180	54
TIMES INTEREST EARNED RATIO	4.1 TIMES[731/180]	2.9TIMES [157/54]

D. Ratio of total liabilities to stockholders’ equity is calculated to measure financial leverage of the company.

	MARRIOTT	HYATT
TOTAL LIABILITIES	7398	2125
STOCK HOLDER'S EQUITY	1585	5118
total liabilities to stockholders’ equity	4.7 [7398/1585]	0.4 [2125/5118]