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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Comprehensive profitability and solvency analysis
Starwood Hotels & Resorts Worldwide Inc. (HOT)

and Wyndham Worldwide Corporation (WYN)

are two major owners and managers of lodging and resort properties in the United States. Financial data (in millions) for a recent year for the two companies are as follows:

The average liabilities, stockholders' equity, and total assets were as follows:


I. Determine the following ratios for both companies (round to one decimal place after the whole percent):
A.Return on total assets
b.Return on total stockholders' equity
c.Times interest earned
d.Debt ratio for the most recent year.
e.Ratio of liabilities to stockholders' equity for the most recent year.

To determine

Introduction:

Accounting ratios are used to evaluate the financial performance of the business organisation

Profitability analysis:

Itis used to evaluate the ability of a company to generate income relative to revenue, assets, operating cost and shareholders' equity during a specific period.

Solvency analysis:

It is used to evaluate companies' ability to pay its long-term debt.It also helps the owner to determine the chances of firm's long-term survival.

To calculate: The ratios for both the companies.

Explanation
    RatiosSW
    Return on total assets782+139 8,711=0.11916+125 9,698=0.11
    Return on shareholder's equity633 2443=0.26612 1,103=0.55
    Times interest earned782+139 139=6

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