Marriot Corporation Case Analysis
Suggestion: Yes, the idea of dividing MC into two companies that separate out property ownerships from Company’s Services Operation is cost effective and value added (exhibit 1), thus should be recommended to the board of MC. As, the plan is launched by distributing same shares of special stock dividends to MC’s original shareholders, MC’s shareholders would be tax-exempted for these special dividends that they received as the same time company has benefiting from lower WACC and higher dividend payout (Exhibit 1). Additionally, the split strategy increases MC’s opportunity to raise funds at the lower cost in the capital markets through Marriott International Inc. By splitting out MII, MC is expecting to see that MII with a higher time interest earned of 10.4 and better financial structure (higher current ratio and lower debt to equity ratio) would be rated as “high quality” by S&P and Moody’s in the market (e.g. Aa for Moody’s and AA for S&P). As a result, MII could raise capital/fund easier and at lower rate than MC (assume the revolving loan in exhibit 1 can lower by 1%). This rating improvement would also resolve MC’s current constraint and limitation on raising funds in the capital market.
According to the plan, the new raised fund would be used to expand company’s hotel business by purchasing assets of competitors in financial difficulty. However, we don’t think this business plan with expansion would be accepted by the most of creditors without a proper message to the capital market. Because most of original creditors of MC’s bonds were institutional holders who had been suffered from collapse of Junk Bond and Real Estate Market and might also be forced to sell their holdings on MC’s bond at an extreme low price at the time when MC’s plan is implemented (MC’s bond would be downgraded to non-investment grade due to worsen financial structure). Therefore, most of institutional creditors in the market would have no intension to lend money to MII due to bad reputation resulting from the plan. Also, without “event covenant” in MC’s Bond indentures, other bondholders are worried that this new plan would also result in large losses for them in form of reducing in bond market price. Therefore, we believe that although MC is not restricted to the “event covenant”, it must convince institutional creditors and other bondholders that the creation of new entity “MII” is not a simple wealth transferring process, but an value-adding financial strategy on separating property ownership from Service management.
Wolford General Partnership (WGP) operates plumbing supply business which is also an exclusive supplier for certain stable construction firms. Because of its excellent reputations and services, WGP is able to an extremely profitable entity for the business. WGP uses an accrual method of accounting and has been using June 30 fiscal year for the tax report purpose after its election of §444 since its formation.
A group of investors (Arundel group) is looking into the idea of purchasing the sequel rights associated with films produced by one or more major movie studios. Movie rights are to be purchased prior to films being made. Arundel wants to come up with a decision to either purchase all the sequel rights for a studio's entire production during a specified period of time or purchase a specified number of major films. Arundel's profitability is dependent upon the price it pays for a portfolio of sequel rights. Our analysis of Arundel's proposal includes a net present value calculation of each movie production company. In order to decide whether Arundel can make money buying movie sequel rights depends on whether the net present value of the production company's movies is higher than the estimated 2M per film required to purchase the rights.
MCI current capital structure is x% debt and y% equity. Their key ratios are a, b, and c. Comparing to other firms in the utilities industry they appear to be underutilizing (debt/equity). (See exhibit D). Referencing the forecast there is expected to b...
However, financial situation of the firm plays a very important role in the decision of the bondholder and this company has been one of the most profitable companies America in terms of ROE, ROA ad gross profit margin. Apart from decrease in earnings and cash flow in 1997, UST had continuous increases in sales (10-year compound annual growth rate of 9%), earnings (11%) and cash flow (12%). They are generating their cash flows out of the operations. Thanks to their premium pricing, they are achieving more than average gross profit margin. So, over the years UST's revenues are stable and positive, and generally its statements are positive. The company does not have any problems with its cash flow.
Marriott invests a lot of money in long term assets that's why it is really necessary for the company to maximize and optimize its debt. And the company has an A rating. It means that Marriott is able to borrow an important amount of money to invest and it could be heavily indebted.
Cannon knew that his compact echo machine, which he carried under his arm by a single handle, would have to perform competitively in a room filled
RBC Financial Group uses a customer relationship management (CRM) strategy that provides a variety of services for a variety of clients. The strategy allows for individual customers to trust RBC and develop a personal relationship with each and every client. One major factor that allows CRM to operate effectively is the use of technologies and analytics to help classify each client’s financial situation. These customer profitability-based techniques allowed RBC to categorize their clients into A, B, and C groups so that the sales teams could optimize their efforts in catering to these different clients. This strategy holds the following strengths: optimizing sales efforts to different customers, easily accessible electronic sales leads, centralized and standardized financial decisions, and building personalized and sustainable customer relationships. There are a few weaknesses to the system though including the complexity in predicting future positions of companies despite the use of analytics as well as the complexity in creating consistency when using these
OPPORTUNITIES: McDonalds has many opportunities to change its look, menu, and customer service. McDonald’s started building newer building incorporating the arch, along with more modern furnishings. The menu has changed by adding more breakfast items and introducing the McCafe in certain areas.
The company is heavy on assets, the debt ratio will only grow to 0.40. with the added $50M in debt. Also, the firm will benefit from an added $2M in a tax shield and be able to return $12.7M a year to its. stockholders and investors, instead of $8.9M if equity is raised. finance the acquisition of the company.
There is an enormous prospect for the Pkolino Company to start a business. The current task has adequate resources and a great plan to keep it operational. Nevertheless, dangers that might plunge Pkolino Company into financial disaster are also present. This is due to the fact that there are always a couple of things that tend to advance in an unanticipated direction even in a well- planned plan. For instance, P’kolino Company’s financial statements do not have provisions for the worst, average, and best scenarios.
There is a range of criteria relevant for a decision of financing a new venture. To construct my list for the evaluation of a new company as an opportunity I have selected to refer to t...
Thirdly, serial borrowing and repurchase throughout several years is considered. This is essentially the financial policy the company has adopted these years. This policy is less risky measured by coverage ratios and is more acceptable to stockholders. However, UST has imminent challenges and value enhancing objectives to meet. If the company has debt capacity untapped upon, large sum repurchases avoid excessive advisory fee, negotiation time and effort, potentially credit rating charge while immediate significant tax shield benefit is made possible.
Primark is a subsidiary company of the Associated British Foods (ABF). It was first opened in Dublin in June 1969, which under the name Penneys. Four more stores were launched within a year in Ireland afterward. Currently, Primark operates in over 270 stores in 9 different countries in Europe such as United Kingdom, Germany, Spain, etc. Primark capitalised on the fast-fashion tendency that began in the 1990s as well as the capability to produce garments cheaply in Asia where clothing values fell dramatically (Shawcross, 2014). It offers a diverse range of products which includes kids clothing, menswear, womenswear, accessories, home ware, beauty products and confectionary. According to TNS market research ranking, Primark ranks the second
Right from the get-go, Jeff Immelt had an uphill battle taking over as CEO of GE. Several factors caused this to be a more difficult time than might otherwise have been. First, he assumed the role on September 7th, and of course a few days later, the United State was attacked. Immediately, he had to deal with GE casualties and donate cash and equipment towards the efforts at the World Trade Center. Second, Immelt came in on the heels of an economy that was cooling from the internet bubble a few years earlier. In September of 2000, the S&P 500 was over 1500, and a year later it was just above 1000. The attack on 9/11 further destabilized the weakened economy and sent investors scurrying for cover. According to the article by Christopher
The debt used to acquire Salomon has been an important issue for the finances of the company. Although financially storng and unlikely to default, the company needs to look into reducing its debt to increase its profitability.