Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 14, Problem 14.3ADM
Marriott and Hyatt: Solvency and profitability analysis
Marriott International, Inc., and Hyatt Hotels Corporation arc 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):
Marriott | Hyatt | |
Operating profit before other expenses and interest | $677 | $ 39 |
Other income (expenses) | 54 | 118 |
Interest expense | (180) | (54) |
Income before income taxes | $551 | $103 |
Income tax expense | 93 | 37 |
Net income | $ 458 | $ 66 |
Balances sheet information is as follows:
Marriott | Hyatt | |
Total liabilities | $7,398 | $2,125 |
Total stockholders' equity | 1,585 | 5,118 |
Total liabilities and stockholders' equity | $8,983 | $7,243 |
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 (round ratios and percentages to one decimal place):
- A. Return on total assets
- B. Return on stockholders’ equity
- C. Times interest earned
- D. Ratio of total liabilities to stockholders' equity
- 2. Based on the information in (1), analyze and compare the two companies' solvency and profitability.
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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):
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Marriott
Hyatt
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Operating profit before other expenses and interest
$677.00
$39.00
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Other income (expenses)
54.00
118.00
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Interest expense
(180.00)
(54.00)
5
Income before income taxes
$551.00
$103.00
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Income tax expense
93.00
37.00
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Net income
$458.00
$66.00
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Balance sheet information is as follows:
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Total liabilities
$7,398.00
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Total stockholders’ equity
1,585.00
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Total liabilities and stockholders’ equity
$8,983.00
$7,243.00
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The average liabilities, average stockholders’ equity, and average total assets are as follows:…
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):Please see the attachment for details:1. Determine the following ratios for both companies, rounding ratios and percentages to one decimal place:a. Return on total assetsb. Return on stockholders’ equityc. Times interest earnedd. Ratio of total liabilities to stockholders’ equity2. Based on the information in (1), analyze and compare the two companies’ solvency and profitability.
CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below:
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4,300,000
Net operating income
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301,000
Average operating assets
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The following questions are to be considered independently.
3. The Chief Financial Officer of the company believes a more realistic scenario would be a $1,550,000 increase in sales, requiring a $310,000 increase in average operating assets, with a resulting $444,875 increase in net operating income. What would be the company’s ROI in this scenario? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Chapter 14 Solutions
Corporate Financial Accounting
Ch. 14 - Briefly explain the difference between liquidity,...Ch. 14 - What is the advantage of using comparative...Ch. 14 - Prob. 3DQCh. 14 - How would the current and quick ratios of a...Ch. 14 - Prob. 5DQCh. 14 - What do the following data, taken from a...Ch. 14 - A. How does the rate earned on total assets differ...Ch. 14 - Kroger, a grocery store, recently had a...Ch. 14 - Prob. 9DQCh. 14 - Prob. 10DQ
Ch. 14 - Horizontal analysis The comparative accounts...Ch. 14 - Vertical analysis Income statement information for...Ch. 14 - Current position analysis The following items are...Ch. 14 - Accounts receivable analysis A company reports the...Ch. 14 - Inventory analysis A company reports the...Ch. 14 - Prob. 14.6BECh. 14 - Prob. 14.7BECh. 14 - Asset turnover A company reports the following:...Ch. 14 - Prob. 14.9BECh. 14 - Common stockholders' profitability analysis A...Ch. 14 - Earnings per share and price-earnings ratio A...Ch. 14 - Vertical analysis of income statement Revenue and...Ch. 14 - Prob. 14.2EXCh. 14 - Common-sized income statement Revenue and expense...Ch. 14 - Vertical analysis of balance sheet Balance shed...Ch. 14 - Horizontal analysis of the income statement Income...Ch. 14 - Current position analysis The following data were...Ch. 14 - Prob. 14.7EXCh. 14 - Current position analysis The bond indenture for...Ch. 14 - Accounts receivable analysis The following data...Ch. 14 - Accounts receivable analysis Xavier Stores Company...Ch. 14 - Inventory analysis The following data were...Ch. 14 - Inventory analysis QT, Inc. and Elppa Computers,...Ch. 14 - Ratio of liabilities to stockholders' equity and...Ch. 14 - Prob. 14.14EXCh. 14 - Ratio of liabilities to stockholders' equity and...Ch. 14 - Prob. 14.16EXCh. 14 - Profitability ratios The following selected data...Ch. 14 - Profitability ratios Ralph Lauren Corporation...Ch. 14 - Six measures of solvency or profitability The...Ch. 14 - Five measures of solvency or profitability The...Ch. 14 - Earnings per share, price-earnings ratio, dividend...Ch. 14 - Prob. 14.22EXCh. 14 - Earnings per share, discontinued operations The...Ch. 14 - Prob. 14.24EXCh. 14 - Unusual items Explain whether Colston Company...Ch. 14 - Comprehensive Income Anson Industries, Inc....Ch. 14 - Horizontal analysis of income statement For 20V2,...Ch. 14 - Prob. 14.2APRCh. 14 - Prob. 14.3APRCh. 14 - Measures of liquidity, solvency, and profitability...Ch. 14 - Solvency and profitability trend analysis Addai...Ch. 14 - Horizontal analysis of income statement For 20Y2,...Ch. 14 - Prob. 14.2BPRCh. 14 - Effect of transactions on current position...Ch. 14 - Measures of liquidity, solvency and profitability...Ch. 14 - Solvency and profitability trend analysis Crosby...Ch. 14 - Financial Statement Analysis The financial...Ch. 14 - Prob. 14.1ADMCh. 14 - Deere: Profitability analysis Deere Company...Ch. 14 - Marriott and Hyatt: Solvency and profitability...Ch. 14 - Prob. 14.1TIFCh. 14 - Prob. 14.3TIF
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