Project 3 Revision of wrkbk and Report to Management

Feedback for Project 3: Analyzing Financial Reports

Thank you for your milestone Report to Management submission of Project 3. The report was well written and demonstrated part of your analysis and recommendations well. Your analysis and narrative do not reflect all the steps in the Project. Please make the following corrections before resubmitting the step for grading,

· Your analysis and recommendations should cover the following areas (please note, this is for guidance, you may already have this in your report):

· In step 1: Choice Hotels International would like to know how their market share compares with Marriott International. This comparison will help Choice Hotels develop a strategy to gain a competitive advantage over Marriott.

· In step 2: Choice has asked for advice on attracting new investors. You need to compare financial reports and measure the difference between the two companies

· In step 3: The client, Choice Hotels, is also interested in bolstering their assets and improving their costing model to account for these assets.

· In step 4: Now you will need to determine if it would be more beneficial for the equity firm to acquire Choice Hotels or Marriott International.

· In step 5: Summarize the key lessons from your discussion on mergers and acquisitions at the meeting.

· In the narrative the statement “It’s working capital went another year in the red, going from (1,776) in 2016 to (5,736) in 2017” is incorrect. Working Capital in 2017 was (3,263) making an increase in the deficit of 1,487.

· A ROE of (0.54) for CCH indicates a negative return on equity, this is far worse than the .368 return on equity of MAR

· The statements “It is not ideal because each suite yields a different volume of occupancy. The presidential suite only uses about eight percent of overhead.”and “Possibly decreasing the amount of presidential suites will allow the company to raise its price to meet the suites’ true value” are incorrect.

· What does “a different volume of occupancy” mean?

· The presidential suite uses 39.6% of overhead under ABC.

· The 8% is not allocated according to ABC, and only recovers $30,000 of overhead per unit, regardless of the type of room.

· Under the original costing method, only $750,000 of overhead is applied to the presidential suite, when ABC shows $3,389,053.26 is used.

· The recommendation that Choice decrease the number of Presidential suites “giving more overhead to the two main suites bringing in revenue for the business” is incorrect.

· The Presidential suites give $100,000 per unit of revenue at the $1,050,000 sale price and helps contribute to covering the MoH

· If they eliminated the Presidential suites, they would be at a competitive disadvantage to other hotels with similar suites (most in their class range)

· The only way to improve the margins is to increase the sales price of the Presidential suite. What would be the minimum increase?

· Decreasing the “amount” of presidential suites makes no change to their “true value”. If you sell $10 widgets for $5, it doesn’t matter if you sell 1 or 100, it will still be a loss. You cannot make up for a negative margin by selling more or less of the widgets. You can only increase the price of the widgets.

·  Keep in mind, the companies are in different scales; CCH is in thousands and MAR is in millions

· Your citations “(“10 Interesting Facts”, n.d.)” and “(” Hotels and Tourism”, n.d.)” are incorrect. Use Anonymous if the author is unknown.