Question

	Choice Hotels			Marriott International
Ratios	2016	2015		2016	2015
Quick ratio = (cash and cash equivalent + marketable securities + accounts receivable ) / current liabilities	1.17	1.36		$                     1.19	$                                   2.58
Acid test ratio = (current assets – Inventory ) / current liabilities	_	_			_
EBIT = revenue – operating expenses (OPEX) + nonoperating income	$                                0.07	$                  0.14		$17,107.00	$14,486,029
EBITDA = earnings before interest, taxes, depreciation and amortization	11,542,000	11,705,000		$168,000,000	$139,000,000
Times-interest-earned = EBIT or EBITDA / interest charges	0.18	5.3		0.20	0.13
Operating income = revenue – operating expenses	$                 (685,746.00)	$     634,559.00		$        (1,368,000)	$                      13,136,000
Debt ratio = total debt / total assets	0.34	0.63		0.34	0.63

-0.46

1. Quick ratios between 0.5 and 1 are considered satisfactory, as long as the collection of receivables is not expected to slow. Does the client, Choice Hotels, have enough current assets to meet the payment schedule of current liabilities with a margin of safety?

2. Which of the above ratios would you use to determine which company, Choice Hotels or Marriott International, is more attractive for an acquisition by the equity firm and why?

3. Which company would you invest in and why? Has your decision changed after you computed the above ratios?

Answer 1

1.Quick ratio of choice hotel is over 1 and then it's over enough cash/short term assets so as to payment schedules of current liabilities. Since the quick ratio is over 1.5, it's margin of safety.

2.Choice hotel is a lot of attractive as a result of, it's higher EBIT, EBITDA and in operation financial gain. Debt ratio is sort of concerning one for choice hotel that is good and fewer risky compared to lower debt ratio

3.I would prefer to invest in choice hotel as a result of they need less risk by having more debt relatively. and therefore the choice hotel uses their profit economical approach. this can be inferred from acid ratio. Marriott hotel has acid ratio of over 4 which implies it's far more than enough money to pay back their short term liabilities. These excess cash would possibly cut back the profit of the corporate.