You are a financial analyst charged with evaluating the asset efficiency of companies in the hotel industry.

Question:

You are a financial analyst charged with evaluating the asset efficiency of companies in the hotel industry. Recent financial statements for Marriott International include the following note:


Required:
1. Assume that Marriott followed this policy for a major construction project this year. Explain why Marriott’s policy increases, decreases, or has no effect on the following:
a. Cash flows.
b. Fixed asset turnover ratio.
2. Normally, how would your answer to requirement (1b) affect your evaluation of Marriott’s effectiveness in utilizing fixed assets?
3. If the fixed asset turnover ratio decreases due to interest capitalization, does this change indicate a real decrease in efficiency? Why or why not?

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Financial Accounting

ISBN: 9781264229734

11th Edition

Authors: Robert Libby, Patricia Libby, Frank Hodge

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