Question 4 O pts Hospitality Companies G and H are both in the hospitality business. One company operates hotels and residential complexes. Rather than owning the hotels, this firm chooses to manage or franchise its hotels. The company receives its revenues each month based on long-term contracts with the hotel owners, who pay a percentage of the hotel revenues as a management fee or franchise fee. Much of this company's growth is inorganic - the company buys the rights to manage existing hotel chains and also the rights to use the hotel's brand name. This company has also pursued a strategy of repurchasing a significant percentage of the shares of its own common stock. The other company owns and operates several chains of upscale, full-service hotels and resorts. The firm's strategy is to maintain market presence by owning all of its properties, which contributes to the high recognition of its industry-leading brands. Hints: - Which hotel chain owns its properties? Look at PP&E. - What happens when you repurchase shares? What it this operation recorded in the balance sheet? O Hotel chain franchiser is G, Hotel chain owner is H Hotel chain franchiser is H, Hotel chain er is G Bees ty tel:(12)%2045%200%200%200 8 7 15 9 5 7 4 0 9 A 5 3 2 3 14 14 " 0 3 2 5 19 62 4 0 25 8 7 6 46 19 0 0 3 33 100 30 10 16 0 56 33 0 7 3 25 4 39 49 7 0 4 4 15 53 0 9 23 100 2 18 0 3 23 17 0 39 21 100 Computers I 14 41 10 18 1 16 5 9 31 84 8 4 * 56 0 3 2 2 2 9 100 100 35 64 07 0 Newspapers K L 25 35 9 14 0 2 2 4 36 56 25 23 4 13 0 5 19 21 2 100 100 Airlines M N 6 10 4 2 1 1 5 4 17 16 " 10 42 75 74 0 1 28 1 13 8 100 100 Pharmaceutic O 1 13 5 11 3 10 2 2 11 35 * 3 23 0 10 u " 85 26 1 6 100 100 70 2 100 1 1 100 8 12 100 4 100 6 7 100 7 12 4 Current Liabilities-Total ASSETS (%) Cash & ST Investments Receivables Inventory Current Assets Other Current AssetsTotal Net Property, Plant, & Equipment Long-Term Marketable Securities Goodwill & Intangibles Assets Other Assets-Total ASS LIABILITIES & EQUITY (%) Accounts Payable Debt in Current Liabilities Current Liabilities Other Current Long-Term Debt Deferred Taxes LiabilitiesOther LiabilitiesTotal Stockholders' Equity Total Liabilities & Equity INCOME/EXPENSES (%) Revenue Cost of Goods Sold Gross Profit SG&A Expense R & D Exp. Depreciation & Amort. Other Operating Expense Earnings before Interest and Taxes Net Interest Expense Other Pretax Income Income Tax Expense Minority Int. in Earnings Net Income MARKET DATA Beta Beta Price/Earnings Price to Book Dividend Payout (%) LIQUIDITY Current Ratio 9 > 4 4 7 8 21 21 32 JA 9 4 4 66 66 34 100 0 11 17 1 0 9 0 3 29 71 100 5 7 7 19 17 50 3 12 83 17 1- 100 5 1 8 13 4 4 0 7 24 76 100 31 J 5 15 52 wa 13 2 14 80 20 100 17 0 20 38 wo 36 JO 0 U 15 89 11 100 2 2 4 4 + 8 15 15 14 1 1 1 18 47 53 100 10 5 38 53 We 63 0 U 43 159 (59) 100 14 28 20 18 o 8 4 4 59 41 100 4 4 0 20 24 0 0 0 5 29 71 100 4 8 12 23 10 10 19 0 U 32 66 34 100 6. 6 0 12 18 o 0 o 0 28 46 54 100 5 3 24 33 13 0 0 34 80 20 100 1 1 2 8 11 1 62 02 12 3 88 2 5. 3 19 26 20 16 16 14 6 63 37 100 4 0 19 23 22 0 13 59 41 41 100 12 100 100 (39) ( 61 (32) 0 100 ( (48) 52 ( (36) 0 100 (26) 74 (23) 0 100 (60) 40 (6) 100 100 (101) (70) (1) 30 0 100 (60) 40 0 0 5 0 3 32 100 100 100 (81) (74) (67) 19 26 33 (1) (7) (19) 00 (4) (12) 0 0 0 0 0 (0) (0) 18 14 2 (6) 0 (0) (4) (4) 0 (0) 8 15 1 0 (1) (3) 0 0 2 15 1 100 100 (63) (63) 36 37 (28) (12) 0 0 0 (13) 0 0 0 8 13 (1) 0 7 7 8 (3) (3) 0 0 0 47 0 0 30 1 0 0 16 0 (0) 16 (6) 0 10 100 (69) 31 (12) (13) 0 0 6 6 0 0 0 6 (2) 0 4 100 (39) 61 45 0 4 0 12 (2) (4) 6 (2) 0 4 4 0 (5) 0 0 (5) (12) 19 (2) 14 0 17 1 29 100 100 (23) (24) 77 76 (26) (33) (24) 0 0 (23) 0 0 25 19 (15) (0) (12) (1) 14 (1) (2) (0) 0 (3) 12 (5) (5) 16 (1) 3 18 (6) 0 11 2 44 (14) 0 30 31 (8) 0 23 23 1 0 (4) 19 0 11 0.95 24.2 4.2 88.2 0.95 34.0 3.9 0.0 1.15 1.50 1.05 27.2 9.7 nmf 1.8 1.2 25.5 91.5 0.0 0.0 1.00 19.2 6.4 197.5 1.15 59.8 0.3 0.0 1.15 24.0 nmf 29.5 0.95 12.8 5.0 21.8 1.20 22.0 2.8 0.0 0.95 nmf 0.8 (39.4) 1.15 34.9 2.7 41.8 1.20 10.0 3.9 7.9 1.10 10,9 2.4 0.0 0.75 22.9 6.1 88.7 1.15 18.3 5.5 0.0 0.64 0.41 2.01 1.35 0.99 3.48 1.08 0.63 2.49 0.77 1.04 1.02 0.30 0.72 0.43 0.37 1.11 0.90 3.50 2.45 3.17 2.82 1.53 1.45 0.52 0.31 0.60 0.44 1.53 1.03 1.04 0.62 Quick Ratio 8.5 3.9 5.9 13.0 2.2 17.6 5.8 0.6 4.6 9.3 2.5 25.3 2.4 7.7 17.8 5.5 4.9 11.7 4.1 109.7 nm 8.8 13.1 0.6 14.1 62.8 13.6 10.8 5.3 61.2 8.3 4.8 nmf 7.1 2.4 37.0 16.5 1.9 85.4 43.3 1.0 2.3 4.3 1.6 5.9 2.5 22.0 7.6 58.9 ASSET MANAGEMENT Inventory Turnover Receivables Turnover Fixed Assets Turnover DEBT MANAGEMENT Total Debt/Total Assets (%) LT Debt/Sharcholders' Equity (%) Interest Coverage DUPONT ANALYSIS Net Profit Margin %) Asset Turnover Return on Equity (%) nmf = not a meaningful figure 66.0 95.2 6.5 28.5 0.1 nmf 83.0 24.2 79.5 88.7 47.4 159.0 292.5 5.2 106.0 320.9 26.2 nmf 1.9 74.1 4.9 10.2 4.8 8.1 44.8 97.2 29.1 0.0 nmf 45.7 0.0 nmf 65.7 29.3 4.2 79.6 62.4 13.6 62.9 43.5 10.0 59.0 87.7 54.6 501.9 23.2 1.7 10.6 19.0 0.3 19.7 10.3 1.5 21.9 2.0 15.3 0.6 0.4 0.5 1.8 11.2 10.4 4.9 4.2 1.7 36.2 4.9 0.3 2.9 30.1 2.4 nmf 22.8 0.9 46.2 3.8 1.1 5.8 (6.6) 1.0 4.0 0.6 8.1 11.1 0.8 46.0 0.8 23.6 12.1 0.6 16.1 (2.8) 0.3 (5.0) (14.8) Question 4 O pts Hospitality Companies G and H are both in the hospitality business. One company operates hotels and residential complexes. Rather than owning the hotels, this firm chooses to manage or franchise its hotels. The company receives its revenues each month based on long-term contracts with the hotel owners, who pay a percentage of the hotel revenues as a management fee or franchise fee. Much of this company's growth is inorganic - the company buys the rights to manage existing hotel chains and also the rights to use the hotel's brand name. This company has also pursued a strategy of repurchasing a significant percentage of the shares of its own common stock. The other company owns and operates several chains of upscale, full-service hotels and resorts. The firm's strategy is to maintain market presence by owning all of its properties, which contributes to the high recognition of its industry-leading brands. Hints: - Which hotel chain owns its properties? Look at PP&E. - What happens when you repurchase shares? What it this operation recorded in the balance sheet? O Hotel chain franchiser is G, Hotel chain owner is H Hotel chain franchiser is H, Hotel chain er is G Bees ty tel:(12)%2045%200%200%200 8 7 15 9 5 7 4 0 9 A 5 3 2 3 14 14 " 0 3 2 5 19 62 4 0 25 8 7 6 46 19 0 0 3 33 100 30 10 16 0 56 33 0 7 3 25 4 39 49 7 0 4 4 15 53 0 9 23 100 2 18 0 3 23 17 0 39 21 100 Computers I 14 41 10 18 1 16 5 9 31 84 8 4 * 56 0 3 2 2 2 9 100 100 35 64 07 0 Newspapers K L 25 35 9 14 0 2 2 4 36 56 25 23 4 13 0 5 19 21 2 100 100 Airlines M N 6 10 4 2 1 1 5 4 17 16 " 10 42 75 74 0 1 28 1 13 8 100 100 Pharmaceutic O 1 13 5 11 3 10 2 2 11 35 * 3 23 0 10 u " 85 26 1 6 100 100 70 2 100 1 1 100 8 12 100 4 100 6 7 100 7 12 4 Current Liabilities-Total ASSETS (%) Cash & ST Investments Receivables Inventory Current Assets Other Current AssetsTotal Net Property, Plant, & Equipment Long-Term Marketable Securities Goodwill & Intangibles Assets Other Assets-Total ASS LIABILITIES & EQUITY (%) Accounts Payable Debt in Current Liabilities Current Liabilities Other Current Long-Term Debt Deferred Taxes LiabilitiesOther LiabilitiesTotal Stockholders' Equity Total Liabilities & Equity INCOME/EXPENSES (%) Revenue Cost of Goods Sold Gross Profit SG&A Expense R & D Exp. Depreciation & Amort. Other Operating Expense Earnings before Interest and Taxes Net Interest Expense Other Pretax Income Income Tax Expense Minority Int. in Earnings Net Income MARKET DATA Beta Beta Price/Earnings Price to Book Dividend Payout (%) LIQUIDITY Current Ratio 9 > 4 4 7 8 21 21 32 JA 9 4 4 66 66 34 100 0 11 17 1 0 9 0 3 29 71 100 5 7 7 19 17 50 3 12 83 17 1- 100 5 1 8 13 4 4 0 7 24 76 100 31 J 5 15 52 wa 13 2 14 80 20 100 17 0 20 38 wo 36 JO 0 U 15 89 11 100 2 2 4 4 + 8 15 15 14 1 1 1 18 47 53 100 10 5 38 53 We 63 0 U 43 159 (59) 100 14 28 20 18 o 8 4 4 59 41 100 4 4 0 20 24 0 0 0 5 29 71 100 4 8 12 23 10 10 19 0 U 32 66 34 100 6. 6 0 12 18 o 0 o 0 28 46 54 100 5 3 24 33 13 0 0 34 80 20 100 1 1 2 8 11 1 62 02 12 3 88 2 5. 3 19 26 20 16 16 14 6 63 37 100 4 0 19 23 22 0 13 59 41 41 100 12 100 100 (39) ( 61 (32) 0 100 ( (48) 52 ( (36) 0 100 (26) 74 (23) 0 100 (60) 40 (6) 100 100 (101) (70) (1) 30 0 100 (60) 40 0 0 5 0 3 32 100 100 100 (81) (74) (67) 19 26 33 (1) (7) (19) 00 (4) (12) 0 0 0 0 0 (0) (0) 18 14 2 (6) 0 (0) (4) (4) 0 (0) 8 15 1 0 (1) (3) 0 0 2 15 1 100 100 (63) (63) 36 37 (28) (12) 0 0 0 (13) 0 0 0 8 13 (1) 0 7 7 8 (3) (3) 0 0 0 47 0 0 30 1 0 0 16 0 (0) 16 (6) 0 10 100 (69) 31 (12) (13) 0 0 6 6 0 0 0 6 (2) 0 4 100 (39) 61 45 0 4 0 12 (2) (4) 6 (2) 0 4 4 0 (5) 0 0 (5) (12) 19 (2) 14 0 17 1 29 100 100 (23) (24) 77 76 (26) (33) (24) 0 0 (23) 0 0 25 19 (15) (0) (12) (1) 14 (1) (2) (0) 0 (3) 12 (5) (5) 16 (1) 3 18 (6) 0 11 2 44 (14) 0 30 31 (8) 0 23 23 1 0 (4) 19 0 11 0.95 24.2 4.2 88.2 0.95 34.0 3.9 0.0 1.15 1.50 1.05 27.2 9.7 nmf 1.8 1.2 25.5 91.5 0.0 0.0 1.00 19.2 6.4 197.5 1.15 59.8 0.3 0.0 1.15 24.0 nmf 29.5 0.95 12.8 5.0 21.8 1.20 22.0 2.8 0.0 0.95 nmf 0.8 (39.4) 1.15 34.9 2.7 41.8 1.20 10.0 3.9 7.9 1.10 10,9 2.4 0.0 0.75 22.9 6.1 88.7 1.15 18.3 5.5 0.0 0.64 0.41 2.01 1.35 0.99 3.48 1.08 0.63 2.49 0.77 1.04 1.02 0.30 0.72 0.43 0.37 1.11 0.90 3.50 2.45 3.17 2.82 1.53 1.45 0.52 0.31 0.60 0.44 1.53 1.03 1.04 0.62 Quick Ratio 8.5 3.9 5.9 13.0 2.2 17.6 5.8 0.6 4.6 9.3 2.5 25.3 2.4 7.7 17.8 5.5 4.9 11.7 4.1 109.7 nm 8.8 13.1 0.6 14.1 62.8 13.6 10.8 5.3 61.2 8.3 4.8 nmf 7.1 2.4 37.0 16.5 1.9 85.4 43.3 1.0 2.3 4.3 1.6 5.9 2.5 22.0 7.6 58.9 ASSET MANAGEMENT Inventory Turnover Receivables Turnover Fixed Assets Turnover DEBT MANAGEMENT Total Debt/Total Assets (%) LT Debt/Sharcholders' Equity (%) Interest Coverage DUPONT ANALYSIS Net Profit Margin %) Asset Turnover Return on Equity (%) nmf = not a meaningful figure 66.0 95.2 6.5 28.5 0.1 nmf 83.0 24.2 79.5 88.7 47.4 159.0 292.5 5.2 106.0 320.9 26.2 nmf 1.9 74.1 4.9 10.2 4.8 8.1 44.8 97.2 29.1 0.0 nmf 45.7 0.0 nmf 65.7 29.3 4.2 79.6 62.4 13.6 62.9 43.5 10.0 59.0 87.7 54.6 501.9 23.2 1.7 10.6 19.0 0.3 19.7 10.3 1.5 21.9 2.0 15.3 0.6 0.4 0.5 1.8 11.2 10.4 4.9 4.2 1.7 36.2 4.9 0.3 2.9 30.1 2.4 nmf 22.8 0.9 46.2 3.8 1.1 5.8 (6.6) 1.0 4.0 0.6 8.1 11.1 0.8 46.0 0.8 23.6 12.1 0.6 16.1 (2.8) 0.3 (5.0) (14.8)