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?

5. PROPERTY AND EQUIPMENT, NET Property and equipment is stated at cost, including interest incurred during development and construction periods, less accumulated depreciation. Interest capitalized as a cost of property and equipment was $6 million, $3 million, and $4 million for the years ended December 31, 2019, December 31, 2018, and December 31, 2017, respectively.