Marriot and Hilton Multinational Hospitality Firms in America (Math Problem Sample)
Answer the following questions in a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link above.
In your own words, identify two different stock exchanges in the United States. Describe the similarities and differences between the two stock exchanges. Identify one stock from each of the two stock exchanges.
Using the two stocks you identified, determine the free cash flow from 2015 and 2016. What inference can you draw from the companies’ free cash flow?
Using the 2017 and 2018 financial statements for both stocks, prepare two financial ratios for each of the following categories: liquidity ratios, asset management ratios, and profitability ratios. You should have a total of six ratios for each stock, per year. What challenges, strengths, or weaknesses do you see? Please be articulate.
Grading for this assignment will be based on answer quality, logic/organization of the paper, and language and writing skills.
ASSESSMENT OF NYSE AND NASDAQ STOCK MARKETS. CASE: MARRIOT AND HILTON MULTINATIONAL HOSPITALITY FIRMS IN AMERICA
Stock exchange markets helps firms trade and acquire investors. There are different platforms that can be used where firm chose a certain market based on its relative advantage factors. A market that presents less volatility for a firm would be best as it would improve the corporate image of a firm (Min et.al, 2009). Consequently, leap more investors. However, the stock prices are not the only factors to consider but other indicators are also useful as will be analysed in the current report.
Stock exchange in US
In the United States, there are three major stock exchanges namely; New Yolk stock exchange (NYSE), National association of securities dealers automated quotation system (NASDAQ), and American stock exchange (AMEX). Selecting to use NYSE and NASDAQ for the current analysis.
The main difference between the two stock exchange lies on their market. This is to say that they operate in a different market (Chung et.al, 2001). While NASDAQ is a dealers market, NYSE is an auction market. NASDAQ thus makes use of dealers to connect buyers and sellers while NYSE has buyers sellers direct trading. Therefore, transactions between buyers and sellers make the two securities different. The two are also different in their foundation time where NYSE was founded in 1792 while NASDAQ was founded in 1971. NYSE thus becomes a more renowned brand with a market capitalisation of $21.3 trillion against $11 trillion in NASDAQ (Cheon et.al, 2001). From the market charts and daily stock of firms, it can be noted that stocks listed in NASDAQ are more volatile compared to those listed in NYSE. When it comes to traffic control, NASDAQ is a market maker while NYSE is a speciality in controlling traffic which could explain the low rate of volatility in its shock as well as it being a leader in market capitalisation. However, NASDAQ main advantage over NYSE lies on its high digitisation as it is recognised as the first digital stock market. This has given it a competitive edge, thus though incorporated later, it is able to compete with NYSE.
The main similarity between the two exists in the main objective and purpose. The two are platforms through which firms can trade their stock. In addition, they are all big in size and operate on a global scale. The two are also similar on their location. This is to say that transactions are made from the same region since they are both founded in New Yolk.
A lot of firms are traded in this main markets. For the current analysis Hilton Worldwide Holding Inc. will be chosen as a stock trading in NYSE, while Marriot International Inc. will be chosen as a stock trading in NASDAQ (Cheon et.al, 2001).
Hilton Worldwide Holding Inc. is a hospitality multinational of American origin. It manages and franchises a wide range of portfolio of hotels and resorts. It was founded in 1919 in United States and by 2018 it was worth $8.9 billion (Hiton annual report, 2018). On the other hand, Marriot International Inc. is an American multinational in hospitality that manages hotels and lodging facilities. It was founded in 1927 in United States and by 2018 was worth $6.8 billion (Marriot annual report, 2018).
Free cash flow of Hilton Worldwide Holding Inc. and Marriot International Inc. for 2015 and 2016
Free cash flow represents a portion of cash a firm is able to produce through its operations. It is the cash that is left after a firm pays off its operating expenses and capital expenditure.
Free cash flow= net cash from operating activities- capital expenditure
From the results it is clear that both Hilton and Marriott were able to release more cash in 2015 than 2016. This is an indication that there is an increase in capital expenditure between the two years. This is an indication that both firms are upgrading to be up-to-date with their facilities and thus offer more customer satisfaction.
Financial ratios analysis of Hilton Worldwide Holding Inc. and Marriot International Inc. for year 2017 and 2018
Financial ratios are used to determine how sustainable a firm is as well as its future level of going concern. This is determined making use of liquidity, market, profitability, gearing, and activity ratios. Mainly they are used for both internal and external management so that a firm can be able to manage its performance (Jin, 2006).
Liquidity ratios measures the ability of a firm to settling its short-term debts as they fall due. This can be assessed using current ratio and quick ratio. A ratio greater than 1 for this type of ratios is considered good, and the firm is said to be paying its debts well (Min et.al, 2009). From the analysis, the current ratio of Marriot for 2017 is 0.47 and 2018 is 0.42, while the acid ratio is 0.45 and 0.42 for 2017 and 2018 respectively. For the case of Hilton the current ratio is 0.86 and 0.79 for 2017 and 2018 respectively, while the acid test ratio is 0.79 and 0.72 for 2017 and 2018 respectively. The two ratios for both firms are less than 1. This is an indication that both firms are straggling to settle their short-term debts. Marriott is actually straggling more than Hilton.
Profitability ratios measure the ability of a firm to generating income relative to revenue made. Return on assets and return on shareholders’ equity have been used as major measures (Min et.al, 2009). The return on assets measures how well a firm makes use of its assets to generate profits. A ROA greater than 5% is considered good. Marriott has 6% for 2014 and 8% for 2018, while Hilton had 2% for 2017 and -1% from 2018. Hilton is doing badly in terms of efficiently making use of its assets to greater profit. On the other hand, a good ROE is 15% to 20%. Milton has 41% for 2017 and 86% for 2018,
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