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. 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

1. 2. Based on the information in (1), analyze and compare the two companies' solvency and profitability.