Project 3 Choice Hotels: Report to Management

[Here, write about your experience answering the questions in the Cost and Investing worksheet. Explicitly mention your recommendations for cost and pricing and elaborate on why you made that recommendation. Use citations where appropriate.]

A capital budget is a plan for acquisition of capital assets, which are resources that have an expected lifetime that extends beyond the acquisition year (Holquist, 2013). They reflect the value of time and have unique funding sources such as bonds that are needed to complete various projects like; roads, bridges, and infrastructure (Holquist, 2013). The primary goal of capital budgeting is to increase the value of the firm to shareholders.

Profitability ratio analysis is used to determine a company’s return to its investors and is extremely helpful to small business managers and owners (Peavler, 2018). For the investors who have put their own money into a company, the owner wants to show profitability to those investors. When a large equity firm showed interest in acquiring Choice Hotel or Marriott International, we had to determine which would be more beneficial for the firm to acquire Choice Hotel or Marriott International. We looked at both companies 10-k reports and completed a budget and profitability analysis.

The analysis conducted showed that, from 2016-2017, Choice Hotels return on equity went from -45% to -54% and return on assets dropped from 16% to 12%. Although Choice Hotels rate of equity is much worse than Marriott International, Choice Hotels is more profitable and is a better candidate to be acquired by the large equity firm. Choice Hotels has shown improvements in the two years and has higher liquidity ratios, cash flows, and higher revenues than Marriott’s.

[Here, elaborate on your team discussion and summarize your discussion. Explain the impact of potential mergers and acquisitions for an investor. Use citations where appropriate.]

Peavler, R. (2018, November 04). Profitability Ratio Analysis. Retrieved from.