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): Operating profit before other expenses and interest Other revenue Interest expense Income before Income tax expense Income tax expense Net Income Marriott $ 2,366 319 (340) $ 2,345 438 $1,907 Hyatt $332 695 (76) $951 182 $769 Balance sheet information is as follows: Total liabilities Total stockholders' equity Total liabilities and stockholders' equity Marriott $ 21,471 2,225 $23,696 Hyatt $3,966 3,677 $7,643 The average liabilities, average stockholders' equity, and average total assets are as follows: Marriott Hyatt Average total liabilities $20,868 $3,848 Average total stockholders' equity 2,903 3,750 Average total assets 23,771 7,608 INITIAL POST: For your initial post determine the following ratios for both companies, then based on the information analyze and compare the two companies' solvency and profitability. Ratios: (1) Return on total assets; (2) Return on stockholders' equity; (3) Times interest earned; (4) Ratio of total liabilities to stockholders' equity.

Answer 1

Particulars	Marriott	Hyatt
Return on Total Assets	8.02%	10.11%
Return on Stockholders Equity	65.69%	20.45%
Times Interest Earned	7.90 Times	13.51 Times
Total Liabilities to Stockholders Equity	9.65 Times	1.08 Times

Formula for Return on Total Assets = Net Income / Average Total Assets * 100

For Marriott Return on Assets = 1,907 / 23,771 * 100

Return on Total Assets = 8.02%

For Hyatt Return on Total Assets = 769 / 7,608 * 100

Return on Total Assets = 10.11%

Formula for Return on Stockholders Equity = Net Income / Average Stockholders Equity * 100

For Marriott

Return on Stockholders Equity = 1,907 / 2,903 * 100

Return on Stockholders Equity = 65.69%

For Hyatt

Return on Stockholders Equity = 769 / 3,760 * 100

Return on Stockholders Equity = 20.45%

Times Interest Earned = Earnings before Interested and Tax / Interest Expense

Earnings before Interest and Tax = Operating Profit + Other Revenue

For Marriott

Earnings before Interest and Tax = 2,366 + 319 = 2,685

For Hyatt

Earnings before Interest and Tax = 332 + 695 = $ 1,027

For Marriott

Times Interest Earned = 2,685 / 340

Times Interest Earned = 7.90 Times

For Hyatt

Times Interest Earned = 1,027 / 76

Times Interest Earned = 13.51 Times

Total liabilities to Stockholders Equity = Total Liabilities / Stockholders Equity

For Marriott

Total Liabilities to Stockholders Equity = 21,471/2,225 = 9.65 Times

For Hyatt

Total Liabilities to Stockholders Equity = 3,966/3,677= 1.08 Times

Analysis Part

After the Calculation of the desired ratios it is quite clear that out of both none of the parties is a standout performer. In some areas Marriott is good whereas in other areas Hyatt is Good. as ratio indicates Hyatt is having a better Return on Assets and Times Interest Earned whereas Marriott is having Return on Equity for its investors. After studying all the dat available the Hyatt is having a slight edge over the Marriott as it is having a better utilisation of its assets and having less proportion of debt in total base which reflect the good work being done. The better Return on Assets and Times Interest Earned is an indication that Hyatt is enjoying good solvency and having good profitability as well in relation to its obligations. Marriott is lacking somehow having a good assets base but the debt proportion is too high in the total base which is a but risky situation for the future of the company which is affecting the solvency as wel as the profitability due to higher fixed payment obligations.