Comprehensive profitability and solvency analysis

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:

 

Marriott (in millions)

Hyatt

(in millions)

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

 

Balance sheet information is as   follows

Marriott (in millions) Hyatt

(in millions)

 

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 were as follows:

 

Marriott (in millions)

Hyatt

(in millions)

 

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 to one decimal place after the whole percent):

a.    Rate earned on total assets

b.   Rate earned on stockholders’ equity

c.    Number of times interest charges are earned

d.   Ratio of liabilities to stockholders’ equity

2.                                Analyze and compare the two companies, using the information in (1).