Reference no: EM131527826

Question: Marriott International, Inc. and Hilton Hotels Corp. 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):

Marriott Hilton

Net income                                $596             $238

Interest expense                           99               274

Income tax expense                      100              127

Balance sheet information at the end of the period is as follows (in millions):

Marriott Hilton

Total liabilities                                                     $4,587                $5,674

Total stockholders' equity                                       4,081                  2,568

Total liabilities and stockholders' equity                     8,668                   8,242

The average liabilities, stockholders' equity, and total assets for the year were as follows (in millions):

Marriott Hilton

Average total liabilities                                           $4,462                 $5,808

Average total stockholders' equity                              3,960                  2,404

Average total assets                                                8,422                  8,212

1. Determine the following ratios for both companies. (Round to two decimal places.)

a. Rate earned on total assets

b. Rate earned on total stockholders' equity

c. Number of times interest charges earned

d. Ratio of liabilities to stockholders' equity

2. Determine the leverage formula for both companies.

3. Analyze and compare the two companies, using the information in (1) and (2).