Choice Hotels Marriott International (2016/2015)-1 (2016/2015)-1 Ratios 2016 201

Question

Choice Hotels Marriott International (2016/2015)-1 (2016/2015)-1 Ratios 2016 2015 2016 2015 Percent Change from 2015 to 2016 Percent Change from 2015 to 2016 Choice Marriott Basic earning power (BEP) ratio = earnings before interest and taxes (EBIT) / total assets 3.5 3.2 0.06 0.23 0.09 2.98 Return on equity (ROE) = net profit / total equity -0.45 -0.32 0.15 -0.24 0.41 -1.61 Return on assets (ROA) = net income / total assets 0.16 0.18 0.03 0.14 -0.08 -0.77 Profit margin = profit (gross or net) / sales -0.14 -0.16 0.18 0.15 -0.13 0.41 Operating margin = operating income / revenue 0.26 0.26 0.16 1.57 -0.01 -0.90 Choice Hotels Marriott International (2016/2015)-1 (2016/2015)-1 Ratios 2016 2015 2016 2015 Percent Change from 2015 to 2016 Percent Change from 2015 to 2016 Choice Marriott Basic earning power (BEP) ratio = earnings before interest and taxes (EBIT) / total assets 3.5 3.2 0.06 0.23 0.09 2.98 Return on equity (ROE) = net profit / total equity -0.45 -0.32 0.15 -0.24 0.41 -1.61 Return on assets (ROA) = net income / total assets 0.16 0.18 0.03 0.14 -0.08 -0.77 Profit margin = profit (gross or net) / sales -0.14 -0.16 0.18 0.15 -0.13 0.41 Operating margin = operating income / revenue 0.26 0.26 0.16 1.57 -0.01 -0.90

Explanation / Answer

IN 2015 the ROA of Choice hotel and Marriott International 0.18 and 0.14 it is to be supposed that the both companies have the assets of 100$ each in the year 2015

which means in the case of choice hotels they have income of 18$ and marriott international have the income of 14$ in the year 2015

Now, the return on assets ratio is acceptable because choice hotel gives the return of 18% approx. and marriott international gives retun of 14% approx. which is the acceptable percentage also.

the first one is BASIC EARNING POWER(BEP) RATIO because this ratio helps in determining the total earning before interest and taxes of the company which is helpful in calculating the EARNING PER SHARE(EPS) as well

the second one is PROFIT MARGIN because it is best part of a company to know about before the acquisition because only it tells about the earning capacity of the company and tells about the cost to produce the output

and the third one is RETURN ON EQUITY because it is the ratio that tells that the company is able to provide sufficient returns to their shareholders or not and that is the company is enjoying enough profits that satisfy their shareholders expectations or not.

3.I would like to invest in choice hotels because it has more ROA than the marriott internationals in both the years and above that PROFIT MARGIN is also higher than the marriott international in both the years it means that even the company is not able to provide sufficient returns to their shareholders in 2016 and 2015 but the company has the capacity to earn a sound profit and entertain their shareholders with good returns in the upcoming future because the company has positive profit margin and mote than that of the marriott internationals.

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