Instructions for completing this workbook:
To complete the CHH Income Statement 10-Q and 10-K worksheet:
1. Locate the CHH 10-Q and 10K income statements by using the links in row 1 above the respective quarter and year.
2. When you arrive at the SEC.gov website, click the 10-Q or 10-K document.
3. Click the Table of Contents link in the upper left corner.
4. Use the links in the Table of Contents to find the information you need to complete the worksheet.
5. Enter or copy the respective data into the worksheet.
6. Solve for the percent (%) change columns by using this example formula: Q3/Q2 - 1.
7. Convert the change columns to percentages.
8. Substitute any question marks with zeros (0).
9. Answer the questions in each worksheet.
10. Highlight significant changes of ±25 percent in the income statement categories of total revenues, total operating expenses, and net income in the Income Statement worksheet.
Repeat Steps 1 to 9 above for the Balance Sheet and Statement of Cash Flows worksheets.
To complete the Business Performance and Balance Sheet Ratio tabs:
1. Use the data from the respective Income Statement, Balance Sheet, or Statement of Cash Flows worksheets.
2. Substitute the respective formula information with the data.
3. Solve the respective formulas.
4. Answer the questions in both worksheets.
CHH Income Statement
Questions from Choice Hotels:
1. Explain the various sources of revenue recognized by Choice Hotels. You may wish to read the first two pages of the 10-K business section for explanations
2. We would like to increase our net income next year. Based on your 10-K income statement analysis, which accounts should we look at to achieve this goal and why? Do you expect the new lower federal income tax to increase net income ?
3. Which of these income statement accounts would have the greatest impact on reducing our overall debt and why? Recognize that only cash can be used to reduce debt.
CHH Balance Sheet
1. What portion of assets are finance with debt and what portion with equity? What difference does it make? Does it matter that Liabilities are higher than Assets and equity is negative?
2. Based on your estimation, do we have enough cash and cash equivalents to pay off our current liabilities? Would you advise eliminating the loyalty program or is it better to keep some liabilities? If we have more than enough cash and cash equivalents, what percentage of long-term debts, if any, can we pay?
3. Which balance sheet account(s) on our 10-K report, in your estimation, should we consider to reduce our long-term debt, and why? Management has chosen to make investments in other entities such as loans to hotel owners, and funding employee benefit plans. Management considers these to be wise and necessary for growth.
CHH Cash Flow
Questions from Choice Hotels:
1. Should the company try to reduce debt or to grow rapidly to return to a positive stock holder equity? We are trying to reduce our debt. How would you recommend modifying the cash flow (increase or decrease) in each of the three activities: (1) operating activities, (2) investing activities, and (3) financing activities? Explain. Remember that positive numbers mean cash is flowing in and negative numbers mean that cash is flowing out
2. We are trying to improve our operations by increasing cash flow in one of the three activities: (1) operating activities, (2) investing activities, or (3) financing activities. Which one of the three activities would you recommend, and why?
3. Is there sufficient operating cash flow to sustain the capital expenditures and distribute dividends to shareholders?
CHH Business Performance Ratios
Questions from Choice Hotels:
Note: Use the ratios in your answers, and explain what the ratios mean. Note: Shareholder equity remains negative at the end of 2017. The deficit is decline. The large negative equity was caused by earlier purchases of Treasury Stock. This will make the equity multiplier, return on equity, and the debt to equity ratios meaningless.
1. To help improve our operations, comment on how we are doing with respect to asset management. Are there any areas for improvement?
2. To measure our company's solvency, which of these ratios would we use and why? For Companies with deficits in shareholder equity, many analysts look to consistent strong cash flow from operations as the best indication of solvency
3. In an effort to help us improve our overall debt situation, we would like you to provide us with an assessment of our company's solvency and leverage. What would be your plan to achieve positive equity?
4. Why might the ratios have increased or decreased?
CHH Balance Sheet Ratios
Questions from Choice Hotels:
Note: Use the ratios in your answers, and explain what the ratios mean.
1. Based on your calculations of current ratio and total-asset turnover ratio, what would you recommend we do to improve our asset management?
2. We would like to improve the use of our working capital. Based on your ratio calculations. What are your specific recommendations? Please note that the current liability for deferred revenue consists primarily of amounts owed to customers in Loyalty programs. This will limit what can be done to increase working capital. See below:
3. Based on the ratios you calculated above, would you invest in our company? Why or why not?
Attachment:- Assignment.rar