Response to the following problem:
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).