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In: Finance

Based on your horizontal analysis of Choice Hotels' and Marriott International's total revenue, total expenses, and net income


1. Based on your horizontal analysis of Choice Hotels' and Marriott International's total revenue, total expenses, and net income, which company would be a more attractive target for an acquisition by the equity firm and why?

2. Given the changes in total revenue, operating income, and net income from 2016 to 2017, did Choice Hotels or Marriott International experience more change? Which area (total revenue, operating income, or net income) changed most?

Solutions

Expert Solution

Source of data for the table below:

  1. Annual Report, Form 10 K filing for the fiscal year 2016 & 2017 for Choice Hotel
  2. Annual Report, Form 10 K filing for the fiscal year 2016 & 2017 for Marriott International

Please see the tables below for Horizontal analysis

In the data below, total revenues and net income are directly observation in the Income Statement. Total expenses are not directly available and the same have been back calculated as Total Revenues - Net Income

Change has been calculated as = 2017 figure / 2016 figure - 1

Choice Hotel
Parameter 2017 2016 Change
Total Revenue                1,007,356        924,641 8.95%
Total Expenses                   892,463        785,270 13.65%
Net Income                   114,893        139,371 -17.56%
Marriott International
Parameter 2017 2016 Change
Total Revenue                     22,894           17,072 34.10%
Total Expenses                     21,522           16,292 32.10%
Net Income                       1,372                780 75.90%

1. Based on your horizontal analysis of Choice Hotels' and Marriott International's total revenue, total expenses, and net income, which company would be a more attractive target for an acquisition by the equity firm and why?

  • Marriott International is showing a healthy increase across total revenues and net income
  • Choice Hotels has less than 10% growth rate in revenues while its net income has slipped

Under these situations and basis our analysis, Marriott International would be a more attractive target for an acquisition by the equity firm.

2. Given the changes in total revenue, operating income, and net income from 2016 to 2017, did Choice Hotels or Marriott International experience more change? Which area (total revenue, operating income, or net income) changed most?

Marriott International experienced a higher change.

And the highest change was seen in case of net income, It has gone up by 75.90% in one year.

jeff jeffy answered 2 years ago
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