Starwood Hotels (Starwood) owns and operates many hotel properties under well-known brand names, including Sheraton, W, Westin, and St. Regis. Starwood focuses on the upper end of the lodging industry. Choice Hotels (Choice) is primarily a franchisor of several hotel chains, including Comfort Inn, Sleep Inn, Clarion, EconoLodge, and Rodeway Inn. Choice properties represent primarily the midscale and economy segments of the lodging industry. Exhibit 4.39 (page 315) presents selected profitability ratios and other data for Starwood, and Exhibit 4.40 (page 315) presents data for Choice. (Note that ROCE is not meaningful for Choice because of negative common shareholders’ equity due to open market share repurchases, not accumulated deficits. As of the end of 2008, Choice had repurchased over one-third of all common shares issued: 34,640,510 out of 95,345,362 shares.) One of the closely followed metrics in the lodging industry is occupancy rate, which gives an indication of the capacity utilization of available hotel rooms. A second measure is the ADR (average daily rate), which measures the amount actually collected for an average room per night. Finally, REVPAR (revenue per available room) also is an important measure, which measures periodto-period growth in revenues per room for comparable properties (adjusted for properties sold or closed or otherwise not comparable across years). The interaction of occupancy rate and ADR is REVPAR.
Exhibit 4.39
Exhibit 4.40
REQUIRED
Analyze the changes and the differences in the profitability of these two hotel chains to the deepest levels available given the data provided. Compare and contrast the ROAs and ROCEs of both companies. Do the results match your prior expectations given the type of lodging for which each company specializes?
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Financial Reporting, Financial Statement Analysis and Valuation
- Fillmore Industries is a vertically integrated firm with several divisions that operate as decentralized profit centers. Fillmore's Systems Division manufactures scientific instruments and uses the products of two of Fillmore's other divisions. The Board Division manufactures printed circuit boards (PCBs). One PCB model is made exclusively for the Systems Division using proprietary designs, while less complex models are sold in outside markets. The products of the Transistor Division are sold in a well-developed competitive market; however, one transistor model is also used by the Systems Division. The costs per unit of the products used by the Systems Division are as follows: PCB Transistor Direct materials 1,85 0,40 Direct labor 4,20 0,90 Variable overhead 2,40 0,70 Fixed overhead…arrow_forwardThe Walt Disney Company has four profitable business segments, described as follows: Media Networks: The ABC television and radio network, Disney channel, ESPN, A&E, E!, and Disney.com Parks and Resorts: Walt Disney World Resort, Disneyland, Disney Cruise Line, and other resort properties Studio Entertainment: Walt Disney Studios, which releases films by Pixar Animation Studios, Marvel Studios, Disney/Lucasfilm, and Touchstone Pictures Consumer Products: Character merchandising, Disney stores, books, and magazines Disney recently reported sector income from operations, revenue, and invested assets (in millions) as follows: Income from Operations Revenue Invested Assets Media Networks $7,321 $21,152 $29,887 Parks and Resorts 2,663 15,099 23,335 Studio Entertainment 1,549 6,988 15,155 Consumer Products 1,356 4,274 7,526 a. Use the DuPont formula to determine the return on investment for the four Disney sectors. Round whole…arrow_forwardCarnarvon Ltd is a listed diversified retail company. Its stores are located mainly in Australia. It has three main types of stores: general department stores, liquor stores and specialist toy stores. Each of these stores has different products, customer types and distribution processes. In accordance with AASB 8/IFRS 8, Carnarvon Ltd has identified three operating segments: general department stores, liquor stores and specialist toy stores. All three business units earn most of their revenue from external customers. Total consolidated revenue of Carnarvon Ltd is $800 million. Business segment Segment revenue ($000) Profit or loss ($000) Segment assets ($000) General dep store 500 28 800 Liquor stores 220 9 350 Toy stores 80 6 150 All segments 800 43 1300 Required: Determine which segments of Carnarvon Ltd are reportable in accordance with the guidelines provided in AASB 8/IFRS 8. Show your calculations.arrow_forward
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