Questions from Choice Hotels:

Note: Use the ratios in your answers, and explain what the ratios mean.

1. Based on your calculations of current ratio and total-asset turnover ratio, what would you recommend we do to improve our asset management?

Formulas

current ratio = current assets / current liabilities

working capital = current assets current liabilities

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 104,925	$ 74,954
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,722	3,385
Depreciation and amortization marketing and reservation system	10,048	10,157
Franchise agreement acquisition cost amortization	4,375	3,305
Loss (gain) on disposal of assets	(82)	4
Provision for bad debts, net	4,356	1,707
Non-cash stock compensation and other charges	7,716	8,082
Non-cash interest and other (income) loss	808	(274)
Deferred income taxes	3,828	(732)
Equity in net losses from unconsolidated joint ventures, less distributions received	6,702	3,543
Franchise agreement acquisition cost, net of reimbursements	(20,326)	(14,108)
Change in working capital and other, net of acquisition	(65,258)	(25,915)
Net cash provided by operating activities	63,814	64,108
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment	(21,611)	(10,687)
Investment in intangible assets	(1,329)	(2,228)
Proceeds from sales of assets	3,052	0
Business acquisition, net of cash acquired	(231,317)	0
Contributions to equity method investments	(7,206)	(42,127)
Distributions from equity method investments	1,210	1,696
Purchases of investments, employee benefit plans	(2,047)	(1,736)
Proceeds from sales of investments, employee benefit plans	1,828	2,094
Issuance of mezzanine and other notes receivable	(19,005)	(14,977)
Collections of mezzanine and other notes receivable	3,505	552
Other items, net	232	110
Net cash used in investing activities	(272,688)	(67,303)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings pursuant to revolving credit facilities	69,000	23,200
Principal payments on long-term debt	(362)	(309)
Purchase of treasury stock	(70,573)	(7,414)
Dividends paid	(24,454)	(24,333)
Debt issuance costs	(914)	0
Proceeds from issuance of long term debt	352	0
Proceeds from transfer of interest in notes receivable	173	0
Proceeds from exercise of stock options	38,059	6,590
Net cash provided by (used in) financing activities	11,281	(2,266)
Net change in cash and cash equivalents	(197,593)	(5,461)
Effect of foreign exchange rate changes on cash and cash equivalents	(595)	955
Cash and cash equivalents at beginning of period	235,336	202,463
Cash and cash equivalents at end of period	37,148	197,957
Cash payments during the period for:
Income taxes, net of refunds	22,470	30,813
Interest, net of capitalized interest	21,558	21,206
Non-cash investing and financing activities:
Dividends declared but not paid	12,114	12,133
Investment in property and equipment acquired in accounts payable	$ 3,393	$ 895