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):

1

Marriott

Hyatt

2

Operating profit before other expenses and interest

$677.00

$39.00

3

Other income (expenses)

54.00

118.00

4

Interest expense

(180.00)

(54.00)

5

Income before income taxes

$551.00

$103.00

6

Income tax expense

93.00

37.00

7

Net income

$458.00

$66.00

Balance sheet information is as follows:

1

Marriott

Hyatt

2

Total liabilities

$7,398.00

$2,125.00

3

Total stockholders' equity

1,585.00

5,118.00

4

Total liabilities and stockholders' equity

$8,983.00

$7,243.00

The average liabilities, average stockholders' equity, and average total assets are as follows:

MarriottHyattAverage total liabilities$7,095$2,132Average total stockholders' equity1,3645,067Average total assets8,4587,1991.Determine the following ratios for both companies: A.Return on total assets, B.Return on stockholders' equity, C.Times interest earned, D.Ratio of total liabilities to stockholders' equity. Round ratios and percentages to one decimal place.2.Based on the information in (1), analyze and compare the two companies' solvency and profitability.

Questions

1. Determine the following ratios for both companies: Round ratios and percentages to one decimal place.

Marriott / Hyatt

A. Return on Total Assets%%

B. Return on stockholders' equity%%

C. Times interest earned

D. Ratio of liabilities to stockholders' equity

2. Based on the information in (1), and analysis, which of the following statement is incorrect with regard to two companies' solvency and profitability.

Marriott has a higher return on total assets and a higher return on stockholders' equity compared to Hyatt.

Marriott's weak earnings and low debt levels are affecting the company's ability to earn returns for stockholders.

Hyatt is not covering the interest expense on its debt as well as Marriott, which is negatively affecting the return on total assets.

Hyatt's weak earnings and low debt levels are affecting the company's ability to earn returns for stockholders.