Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 11, Problem 4ADM
Hilton and Marriott: Times interest earned
Hilton Worldwide Holdings, Inc. and Marriott International, Inc. are two of the largest hotel operators in the world. Selected financial information from recent income statements for both companies follows (in millions):
| Hilton | Marriott | |
| Operating income | $1,673 | $1,159 |
| Interest expense | 618 | 115 |
| Other expense items | 92 | 44 |
| Income before income taxes | $1,147 | $1,088 |
| Income tax expense | 465 | 335 |
| Net income | $ 682 | $ 753 |
A. Compute the times interest earned ratio for each company. (Round to one decimal place.)
B. Which company appears to better protect creditor interest? Why?
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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:…
Question Content Area
Garnet Company reported the following on its income statement:
Income before income taxes
$450,000
Income tax expense
52,000
Net income
$398,000
An analysis of the income statement revealed that interest expense was $50,000. Garnet Company's times interest earned are earned was _____.
a.11 times
b.8.1 times
c.10 times
d.7.8 times
PepsiCo, Inc. (PEP), the parent company of Frito-Lay snack foods and Pepsi beverages, had the following current assets and current liabilities at the end of two recent years:
Current Year(in millions)
Previous Year(in millions)
Cash and cash equivalents
$25,551
$9,216
Short-term investments, at cost
7,238
4,835
Accounts and notes receivable, net
7,097
7,405
Inventories
2,641
2,635
Prepaid expenses and other current assets
1,647
1,805
Short-term obligations
7,425
3,820
Accounts payable
15,345
12,674
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
Open spreadsheet
Determine the (1) current ratio and (2) quick ratio for both years. Round your answers to one decimal place.
Current Year
Previous Year
1. Current ratio
fill in the blank 2
fill in the blank 3
2. Quick ratio
fill in the blank 4…
Chapter 11 Solutions
Financial & Managerial Accounting
Ch. 11 - Describe the two distinct obligations incurred by...Ch. 11 - Explain the meaning of each of the following terms...Ch. 11 - Prob. 3DQCh. 11 - A corporation issues 26,000,000 of 9% bonds to...Ch. 11 - Prob. 5DQCh. 11 - The following data relate to a 2,000,000, 8% bond...Ch. 11 - Prob. 7DQCh. 11 - Fleeson Company needs additional funds to purchase...Ch. 11 - Prob. 9DQCh. 11 - Issuing bonds at face amount On January 1, the...
Ch. 11 - Issuing bonds at a discount On the first day of...Ch. 11 - Prob. 11.3BECh. 11 - Prob. 11.4BECh. 11 - Prob. 11.5BECh. 11 - Prob. 11.6BECh. 11 - Bond price United States Steel Corporations 7.5%...Ch. 11 - Entries for issuing bonds Thomson Co. produces and...Ch. 11 - Prob. 11.3EXCh. 11 - Prob. 11.4EXCh. 11 - Entries for issuing and calling bonds; loss Hoover...Ch. 11 - Entries for issuing and calling bonds; gain Mia...Ch. 11 - Prob. 11.7EXCh. 11 - Prob. 11.8EXCh. 11 - Present value of an annuity Determine the present...Ch. 11 - Present value of an annuity On January 1 you win...Ch. 11 - Prob. 11.11EXCh. 11 - Prob. 11.12EXCh. 11 - Present value of bonds payable; premium Moss Co....Ch. 11 - Amortize discount by interest method On the first...Ch. 11 - Amortize premium by interest method Shunda...Ch. 11 - Prob. 11.16EXCh. 11 - Prob. 11.17EXCh. 11 - Bond discount, entries for bonds payable...Ch. 11 - Prob. 11.2APRCh. 11 - Entries for bonds payable, including bond...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Prob. 11.5APRCh. 11 - Bond discount, entries for bonds payable...Ch. 11 - Prob. 11.2BPRCh. 11 - Entries for bonds payable, including bond...Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Prob. 11.5BPRCh. 11 - Prob. 1ADMCh. 11 - Prob. 2ADMCh. 11 - Prob. 3ADMCh. 11 - Hilton and Marriott: Times interest earned Hilton...Ch. 11 - Prob. 11.1TIFCh. 11 - Prob. 11.3TIF
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