Hilton Worldwide Holdings Inc. "Hilton is one of the largest and fastest growing hospitality companies in the world, with 6,110 properties comprising 971,780 rooms in 119 countries and territories as of December 31, 2019. For more than 100 years, Hilton has been an innovator in its industry, driven by the vision of our founder Conrad Hilton, "to fill the earth with the light and warmth of hospitality." ... As of December 31, 2019, we had more than 103 million members in our award-winning guest loyalty program, Hilton Honors." - Hilton's 2019 10-K. Answer problems V and VI using the simplified financial statements and selected information from the Hilton's 2019 10-K (see below). Before answering the questions, take a few minutes to review this information. Familiarity with the available information will likely save you some time and mistakes. Note that all numbers in the statements and problems are in millions of dollars (S.QQ0.000). Treat each question independently and watch the dates in the questions and on the statements. The year 2019 means the year ended December 31, 2019. Balance Sheets for 12/31/2019 12/31/2018 Change Cash and cash equivalents 600 500 +100 Accounts Receivable 1,500 1.400 +100 Property, Net 1,200 1,000 +200 Intangibles, Net 11,700 11,900 -200 Total Assets 15,000 14,800 +200 Accounts payable 2,900 2,600 +300 Long-Term Debt 12,500 11,800 +700 Common stock and Paid-in-Capital 5,500 6,800 Retained earnings (Accumulated Deficit) -1,300 (5.900 (6,400) +500 Total Liabilities and Stockholders' 15,000 14,800 +200 EquityIncome Statement for the Year Ended December 31, 2019 Revenues from owned properties 3,800 Revenues from managed properties 5,600 Expenses from owned properties 2,100 Expenses from managed properties 5,700 Interest expense 400 Income tax expense 400 Net income 800 Additional Information: During 2019: 1. Depreciation and amortization expenses (included in expenses from owned properties) totaled $300 - this includes both depreciation of property and amortization of intangible assets. 2. Purchases of property were $400 and all sales of property were made at book value. 3. There were no purchases, sales or impairments of intangible assets during the year. 4. $3,000 was paid to bondholders - this includes $2,600 principle and $400 interest. 5. $100 in common stock was issued in 2018, but none was issued in 2019. 10 Problem V: Statement of Cash Flows (Hilton Worldwide Holdings Inc) 1. Prepare a statement of cash flows for Hilton, for the year ended December 31, 2019. Use the indirect method. Note that I do not care about format - so long as I can tell what the numbers are and in which section they belong2. Like most hotel chains today, Hilton earns more revenue from managing properties than it does from properties that it owns. One effect of this is that Hilton is relativity "asset-light", and so has fairly little depreciation expense. There are various advantages and disadvantages to this strategy. Consider the following argument: "Were Hilton to own more properties, they would have more depreciation, and thus higher operating cash flow." Briefly (1-2 sentences), respond to the above analysis. Problem VI: Pro-forma Statements (Hilton Worldwide Holdings Inc) 1. Prepare a balance sheet and income statement for Hilton for their 2020 fiscal year, using the following assumptions. Use revenues as your 'anchor' and 'long-term debt' as your plug. To save time, you may find it helpful to use the reproduction of the 2019 fiscal year financial statements on the following page. Please round all numbers to the nearest ten million dollars. a. Revenues for both owned and managed properties will fall 25% from 2019 to 2020. b. Net Margin ((Revenues - Expenses (excluding interest and tax)) divided by Revenues) for owned properties will be 26% in 2020. c. Hilton's expenses from manage properties will be $300 higher than their revenue from managed properties in 2020. d. Interest expense will be 2% of beginning long-term debt in 2020. e. In 2020, Income tax expense will be 20% of pre-tax net income if pre-tax net income is positive, and zero if pre-tax net income is negative. f. The current ratio (defined as current assets divided by current liabilities) will be 0.7 at the end of| 2020.f. The current ratio (defined as current assets divided by current liabilities) will be 0.7 at the end of 2020. g. The accounts receivable turnover ratio (defined as revenues from managed properties divided by average accounts receivable) will be 2.5 in 2020. h. In 2020, depreciation of property and equipment will be $100, purchases of property and equipment will be $200, and there will be no sales of property and equipment. i. There will be no purchases, sales or impairment of intangible assets in 2020, but there will be amortization of $100 for these assets. i. The A/P turnover ratio (defined as expenses from owned properties divided by average accounts payable) will be 0.7 in 2020. k. Hilton will pay $100 in dividends during 2020, and will neither buy nor sell their own common stock.Balance Sheets for 12/31/2019 12/31/2020 Cash and cash equivalents 600 Accounts Receivable 1,500 Property, Net 1,200 Intangibles, Net 11,700 Total Assets 15,000 Accounts payable 2,900 Long-Term Debt 12,500 Common stock and Paid-in-Capital 5,500 Retained earnings (Accumulated Deficit) (5,900) Total Liabilities and Stockholders 15,000 Equity Income Statement for the Year Ended 12/31/2019 12/31/2020 Revenues from owned properties 3.800 Revenues from managed properties 5.600 Expenses from owned properties 2.100 Expenses from managed properties 5,700 Interest expense 400 Income tax expense 400 Net income 800