Comparing Starwood Hotels & Resorts and Hilton Hotels The following current items, listed in alphabetical order, are taken from the consolidated balance sheets of Starwood Hotels & Resorts and Hilton Hotels as of December 31, 2006. (All amounts are in millions of dollars.) Any assets or liabilities with which you may not be familiar are noted parenthetically.

Required 1. Compute working capital and the current ratio for both companies.
2. On the basis of your answers to (1), which company appears to be more liquid?
3. As you know, other factors affect a company’s liquidity in addition to its working capital and current ratio. Comment on the composition of each company’s current assets and ways this composition affects the company’s liquidity.

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Starwood Hotels & Resorts Accounts payable Accounts receivables, net of allowance for doubtful accounts of $49 Accrued expenses (liability) Accrued salaries, wages, and benefits Accrued taxes and other Cash and cash equivalents Inventories Prepaid expenses and other Restricted cash Short-term borrowings and current maturities of long-term debt Hilton Hotels Accounts payable and accrued expenses Accounts receivable, net Cash and cash equivalents Current maturities of long-term debt Current portion of notes receivable, net Deferred income taxes (asset) Income taxes payable Inventories Prepaid expenses and other Restricted cash $179 593 955 383 139 183 566 139 329 805 $ 772 312 1,154 47 40 85 45 219 97 182