Hello. I have provided the pages needed from the 10K report. Please help me with Questions 1 and 2 on the Statement of Cash Flows Please help me with Questions 1-4 on the Balance Sheet Please help me with Questions 1-5 on the Income Statement Please help me complete the Ratio Analysis sheet.

Balance Sheet Horizontal Analysis 12 Months Ended Consolidated Balance Sheets - USD ($) $ in Thousands Dec. 31, 2018 Dec. 31, 2017 $ Change 2017 to 2018 % Change 2017 to 2018 Current assets Cash and cash equivalents $26,642 $235,336 -$208,694.00 88.68% Receivables (net of allowance for doubtful accounts of $15,905 and $12,221, respectively) $138,018 $125,870 $12,148.00 9.65% Income taxes receivable $10,122 $0 $10,122.00 0.00% Notes receivable, net of allowances $36,759 $13,256 $23,503.00 177.30% Other current assets $32,243 $25,967 $6,276.00 24.17% Total current assets $243,784 $400,429 $156,645.00 39.12% Property and equipment, at cost, net $127,535 $83,374 $44,161.00 52.97% odwil $168,996 $80,757 $88,239.00 109.26% Intangible assets, net $271,188 $100,492 $170,696.00 169.86% Notes receivable, net of allowances $83,440 $80,136 $3,304.00 4.12% Investments, employee benefit plans, at fair value $19,398 $20,838 $1,440.00 -6.91% Investments in unconsolidated entities $109,016 $134,226 $25,210.00 18.78% Deferred income taxe $30,613 $27,224 $3,389.00 12.45% Other assets $84,400 $67,715 $16,685.00 24.64% Total assets $1,138,370 $995,191 $143,179.00 14.39% Current liabilities Accounts payal $73,511 $67,839 $5,672.00 8.36% Accrued expenses and other current liabilities $92,651 $84,315 $8,336.00 9.89% Deferred Revenue $67,614 $52,142 $15,472.00 29.67% Liability for guest loyalty program $83,566 $79,123 $4,443.00 5.62% Current portion of long-term deb $1,097 $1,232 -$135.00 10.96% Total current liabilities $318,439 $284,651 $33,788.00 11.87% Long-term debt $753,514 $725,292 $28,222.00 3.89% Long-term portion $110,278 $98,459 $11,819.00 12.00% Deferred compensation and retirement plan obligations $24,212 $25,566 $1,354.00 5.30% Income taxes payable $26,276 $29,041 $2,765.00 9.52% Deferred income taxes $0 $39 -$39.00 -100.00% Liability for guest loyalty program $52,327 $48,701 $3,626.00 7.45% Other liabilities $37,096 $42,043 -$4,947.00 -11.77% 31 AM Total liabilities $1,322,142 $1,253,792 $68,350.00 5.45% 23/2019 Commitments and ContingenciesCalculate Net Profit Margin Above 8% 4 Basic Earning Power (BEP) 2018 2017 EBIT Total Assets, Multiply by 1,000 to compare Calculate BEP Above 12% Asset Management Ratios 5 Evaluating Receivables: Days Sales Outstanding a. Calculate Average Daily Sales Total revenues 365 days 365 365 Average Sales per day Receivables (net ......) X 1000 Average Sales per Day b. Calculate Days Sales Outstanding 50 days or lessSmart We 09 Ccek noose Consolidated Statements of cash Flows CASH FLOWS FROM OPERATING ACTIVITIES _ Net income Adjustments to reconcile net income to net cash provided by - operating activities: _- Depreciation and amortization Depreciation and amortization - marketing and reservation --- system $19,59?,000 $20,509,000 $20,663,000 Franchise agreement acquisition cost amortization Impairment of goodwill Gain on disposal of assets, net Provision for bad debts, net Non-cash stock compensation and other charges Non-cash Interest and other investment (income) loss Deferred income taxes Equity in net losses from unconsolidated joint ventures. less --- distributions received $7,389,000 $5,579,000 $1,025,000 Franchise agreement acquisition cost, not of reimbursements Change in working capital and other, net ofacquisition Net cash provided by operating activities $242,896,000 CASH FLOWS FROM INVESTING ACTIVITIES Investment in propenv and equipment Investment in intangible assets Proceeds from sales of assets Asset acquisition, net of cash acquired Collections of notes receivable $4,997,000 $655,000 $11,070,000 Other items, net -$1,040,000 $109,000 $11,000 Net cash used in investing activities $321,252,00 $90,115,000 $98,467,000 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long term debt $9,037,000 $0 $o Net (repayments) borrowings pursuant to revolving credit facilities $20,600,000 -$115,003,000 $25,795,000 Principal payments on long-term debt $603,000 -$660,000 -$988,000 Proceeds from other debt agreements $0 $0 $550,000 Debt issuance costs -$2,590,000 $284,000 Purchases of treasury stoc $148,679,000 $9,807,000 $35,926,000 Dividends paid -$48,715,000 $48,651,000 $46,182,000 Proceeds from transfer of interest in notes receivable $173,000 $24,237,000 So Proceeds from exercise of stock options $41,360,000 $14,107,000 $12,951,000 Net cash used in financing activities $129,417,000 $135,777,000 $44,084,000 Net change in cash and cash equivalents $207,773,000 $31,482,000 $9,484,000 Effect of foreign exchange rate changes on cash and cash equivalents -$921,000 $1,391,000 -$462,000 Cash and cash equivalents at beginning of period $235,336,000 $202,463,000 $193,441,000 Cash and cash equivalents at end of period $26,642,000 $235,336,000 $202,463,000 Cash payments during the year for: Income taxes, net of refunds $77,357,000 $39,181,000 $65,683,000 Interest, net of capitalized interest $43,254,000 $42,405,000 $41,992,000 Non-cash investing and financing activities: Dividends declared but not paid $11,977,000 $12,185,000 $12,112,000 Investment in property, equipment and intangibles acquired in accounts payable and accrued liabilities $5,949,000 $1,099,000 $3,648,000 Sale of investment in unconsolidated joint venture $O $2,350,000 Seller-financing to purchaser so $2,000,000 $0 Questions:1. When you examine the Statement of Cash Flows, you recognize a large investment In Business Acquisitions. What business did Choice Hotels acquire in 2018? And how much did Choice Hotels spend? Hint: See the bottom of page 50 and top of page 51 in the l-K report and a similar line in the statement to the right. 2. in 2018, Choice Hotels made a large repurchase of Treasury stock. Hint: Positive numbers mean cash inows and negative numbers mean cash outows. Does the Net cash provided by operating activities exceed cash outflow for Purchase of Treasury stock and Dividends paid in 2018? Show the amounts. A B C D E F G H N Horizontal Analysis 12 Months Ended Consolidated Statements of Income - USD 3 ($) Dec. 31, 2018 Dec. 31, 2017 Dec. 31, 2016 $ Change 2017 to 2018 % Change 2017 to 2018 $ Change 2016 to 2017 % Change 2016 to 2017 REVENUES: Royalty fees $376,676,000 $341,745,000 $317,699,000 $34,931,000.00 10% $24,046,000.00 8% Initial franchise and relicensing fees $26,072,000 $23,038,000 $19,720,000 $3,034,000.00 13% $3,318,000.00 17% Procurement services $52,088,000 $40,451,000 $35,844,000 $11,637,000.00 29% $4,607,000.00 13% Marketing and reservation system $543,677,000 $499,625,000 $409,120,000 $44,052,000.00 9% $90,505,000.00 22% Other $42,791,000 $36,438,000 $25,526,000 $6,353,000.00 17%% $10,912,000.00 43% Total revenues $1,041,304,000 $941,297,000 $807,909,000 $100,007,000.00 11% $133,388,000.00 17% 11 OPERATING EXPENSES: 12 Selling, general and administrative $170,027,000 $165,821,000 $154,720,000 $4,206,000.00 3% $11,101,000.00 7% 13 Depreciation and amortization $14,330,000 $6,680,000 $6,996,000 $7,650,000.00 $316,000.00 5% 14 Marketing and reservation system $534,266,000 $479,400,000 $459,765,000 $54,866,000.00 11% $19,635,000.00 1% 15 Total operating expenses $718,623,000 $651,901,000 $621,481,000 $66,722,000.00 10% $30,420,000.00 5% 16 Impairment of goodwill $4,289,00 $o $o $4,289,000.00 0% $4,289,000.00 17 Gain on sale of assets, net $82,000 $257,000 $627,000 $175,000.00 68% $370,000.00 59% 18 Operating income $318,474,000 $289,653,000 $187,055,000 $28,821,000.00 10% $102,598,000.00 55% 19 OTHER INCOME AND EXPENSES, NET: 20 Interest expense $45,908,000 $45,039,000 $44,446,000 $869,000.00 2% $593,000.00 1% 21 Interest income $7,452,000 $5,920,000 $3,535,000 $1,532,000.0 26% $2,385,000.00 67% 22 Other (gain) loss $1,437,000 $3,229,000 $1,504,000 $4,666,000.00 145% $1, 725,000.00 115% 23 Equity in net (income) loss of affiliates $5,323,000 $4,546,000 $492,000 $777,000.00 17% $5,038,000.00 1024% 24 Total other income and expenses, net 45,216,000 $40,436,000 $38,915,000 $4,780,000.00 12% $1,521,000.00 1% 25 Income before income taxes $273,258,000 $249,217,000 $148,140,000 $24,041,000.00 10%% $101,077,000.00 68% 26 Income taxes $56,903,000 $126,890,000 $41,428,000 $69,987,000.00 55% $85,462,000.00 206% 27 Net income $216,355,000 $122,327,000 $106,712,000 $94,028,000.00 77% $15,615,000.00 15% 28 Basic earnings per share: Basic earnings per share ( in dollars per 29 [share) $3.83 $2.16 $1.90 $1.67 77% $0.26 14% Diluted earnings per share (in dollars per 30 share $3.80 $2.15 $1.89 $1.65 77% $0.26 14% 31 32 Questions: 33 1. Many of Choice Hotels Income Statement accounts have remained consistent for the past 3 years. However, there is a notable difference from 2017 to 2018 in the 34 Depreciation Amortization expense. What caused this difference? Hint: See page 44 in the 10-K report. Instructions 10-K Document Questions Income Statement Balance Sheet Statement of Cash Flows Ratio Analysis +File Home Insert Page Layout Formulas Data Review View Help Search & Cut Calibri * 11 ~ A" A ae Wrap Text Currency Accent5 Accent6 Comma Comma [0] Paste [B Copy E E Merge & Center Conditional Format as Currency Currency [0] Percent Format Painter Formatting * Table Clipboard Font Alignment Number Styles H2S X V A B C D E F G H 31 32 Questions: 33 L. Many of Choice Hotels Income Statement accounts have remained consistent for the past 3 years. However, there is a notable difference from 2017 to 2018 in the 34 Depreciation Amortization expense. What caused this difference? Hint: See page 44 in the 10-K report. 35 36 37 38 39 40 2. In comparing year-over-year expenses, there is a new expense reported in 2018 called Impairment of Goodwill. What is this expense and why did it occur? Hint: See 41 page 44 of the 10-K report. 42 43 44 45 46 47 48 3. There is a significant decrease in income taxes in 2018 from previous years. What caused this decrease in income taxes? Hint: See page 45 of the 10-K report. 52 53 54 55 4. The largest item in revenue and in expense is Marketing and reservation system. What are these two items and why are the numbers different? Hint: See page 56 in the MD&A 56 57 58 59 60 61 62 5. What are the two most significant trends based on your horizontal analysis over this 3 year period? Explain your reasons for your selections. 63 65 66 Instructions 10-K Document Questions Income Statement Balance Sheet Statement of Cash Flows Ratio Analysis +Document Page 77 of 202 Table of Contents 2017. The number of new construction franchised hotels in the Company's domestic pipeline increased 27% to 773 at December 31, 2018 from 607 at December 31, 2017. The growth in the number of new construction hotels in the domestic pipeline reflects the increase in new construction franchise agreements executed over the last several years and the acquisition of WSFS on February 1, 2018. New construction hotels typically average 18 to 36 months to open after the franchise agreement is executed. The number of conversion franchised hotels in the Company's domestic pipeline increased by 7 hotels or 3% from December 31, 2017 to 253 hotels at December 31, 2018, primarily due to the timing of hotel openings and the timing of signing new conversion franchise agreements. Conversion hotels typically open three to six months after the execution of a franchise agreement. The Company had an additional 56 franchised hotels with 5,399 rooms under construction, awaiting conversion or approved for development in its international system as of December 31, 2018 compared to 70 hotels and 7,153 rooms at December 31, 2017. While the Company's hotel pipeline provides a strong platform for growth, a hotel in the pipeline does not always result in an open and operating hotel due to various factors. Procurement Services: Revenues increased $1 1.6 million or 29% from $40.5 million for the year ended December 31, 2017 to $52.1 million for the year ended December 31, 2018. The increase in revenues primarily reflects the implementation of new brand programs as well as an increase in the volume of business transacted with existing and new qualified vendors and strategic alliance partners. Other Revenue: Revenue increased $6.4 million from the year ended December 31, 2017 to $42.8 million for the year ended December 31, 2018. The increase in other revenue reflects a $8.2 million increase in non-compliance, contract termination, and other franchising revenues and a $3.4 million increase in revenues from the Company's non-hotel franchising lines of business, partially offset by a $5.2 million decrease in the sale of chip-enabled credit card readers to our franchisees as the program nears completion. Selling, General and Administrative Expenses: The cost to operate the business is reflected in SG& A on the consolidated statements of income. SG&A expenses were $170.0 million for the year ended December 31, 2018, an increase of $4.2 million from the December 31, 2017 total of $165.8 million. SG&A expenses for the years end December 31, 2018 and 2017 include approximately $19.8 million and $16.1 million, respectively, related to the Company's alternative growth initiatives and expenses related to the operations of an office building leased to a third party. The $3.7 million increase in SG&A expenses related to non-hotel franchising activities primarily reflect a $1.2 million impairment of a below market lease acquisition cost associated with the office building that reduced SG&A costs recorded in the year ended December 31, 2017 and increased investment in vacation rental activities. SG&A expenses also reflect transaction and transition costs of $6.9 million and $4.0 million for the years ended December 31, 2018 and 2017, respectively. These costs were incurred in conjunction with the acquisition of WSFS on February 1, 2018, as well as other contemplated but not consummated transactions. In the fourth quarter of 2018, the Company restructured the terms of a notes receivable from a franchisee resulting in the establishment of a $2.8 million loan valuation allowance with a charge to SG&A. Refer to Note 4 to our consolidated financial statements for additional information. Additionally, SG&A expenses for the year ended December 31, 2017 included $12.0 million of compensation expenses related to the acceleration of the Company's chief executive officer succession plan. Excluding the SG&A for non-hotel franchising activities, the impact of acquisition transaction and transition costs, the impairment of notes receivable, the impairment of below market lease acquisition costs, and expenses related to the chief executive succession plan, SG&A for the year end December 31, 2018 increased $6.9 million or 5.2% from $133.6 million in the prior year to $140.6 million in the current year primarily due to general cost increases to support the hotel franchising business. Depreciation and Amortization: Depreciation and amortization expense for the year ended December 31, 2018 increased $7.7 million to $14.3 million for the same period of the prior year primarily due to the acquisition of WSFS on February 1. 2018. Amortization totaling $7.0 million was recorded related to the portion of the purchase price allocated to the contract asset acquisition costs. file://E:/UMUC/Summer%202019/10-K%20Document.html 7/23/2019Document Page 78 of 202 Impairment of Goodwill: The Company recorded a $4.3 million goodwill impairment in the fourth quarter of 2018 related to the Saas for vacation rentals reporting unit. Refer to Item 7. Critical Accounting Policies and Note 6 to our consolidated financial statements for additional information. 44 file:///E:/UMUC/Summer%202019/10-K%20Document.html 7/23/2019Document Page 90 of 202 On June 27, 2012 the Company issued unsecured senior notes with a principal amount of $400 million (the "2012 Senior Notes") at par, bearing a coupon of 5.75% with an effective rate of 6.0%. The 2012 Senior Notes will mature on July 1, 2022, with interest to be paid semi-annually on January 1" and July 1". The Company utilized the net proceeds of this offering, after deducting underwriting discounts and commissions and other offering expenses, together with borrowings under the Company's 51Document Page 99 of 202 Table of Contents Other revenue. Other revenue is a combination of miscellaneous non-marketing and reservation system fees, inclusive of quality assurance non-compliance and franchisee training fees, and is recognized in the period the designated transaction or event has occurred. Marketing and reservation system revenues. The Company's franchise agreements require the payment of marketing and reservation system fees. The Company is obligated to use these marketing and reservation system fees to provide marketing and reservation services such as advertising, providing a centralized reservation and property management system, providing reservation and revenue management services, and performing certain franchise services to support the operation of the overall franchise system. These services are comprised of multiple fees including the following: Fees based on a percentage of gross room revenues are recognized in the period the gross room revenue was earned, based on the underlying hotel's sales or usage. Fees based on the occurrence of a designated transaction or event are recognized in the period the transaction or event occurred. System implementation fees charged to franchisees are deferred and recognized as revenue over the term of the franchise agreement. Marketing and reservation system activities also include revenues generated from the Company's guest loyalty program. The revenue recognition of this program is discussed in Choice Privileges Loyalty Program below. Marketing and reservation system expenses are those expenses incurred to facilitate the delivery of marketing and reservation system services, including direct expenses and an allocation of costs for certain administrative activities required to carry out marketing and reservation services. Marketing and reservation system expenses are recognized as services are incurred or goods are received, and as such may not equal marketing and reservation system revenues in a specific period but are expected to equal revenues earned from franchisees over time. The Company's franchise agreements provide the Company the right to advance monies to the franchise system when the needs of the system surpass the balances currently available and recover such advances in future periods through additional fee assessments or reduced spending We make certain payments to customers as an incentive to enter into new franchise agreements ("Franchise agreement acquisition cost"). We capitalize such payments as intangible assets. These intangibles are amortized on a straight-line basis over the estimated benefit period of the arrangement as an offset to royalty fees and marketing and reservation system fees. Impairments from hotel terminations are recorded within the SG&A expenses and marketing and reservation system expenses. The Company also earns revenues on contracts incidental to the support of operations for franchised hotels, including purchasing operations Procurement services revenues. The Company generates procurement services revenues from qualified vendors, Procurement services revenues are generally based on marketing services provided by the Company on behalf of the qualified vendors to hotel owners and guests. The Company provides these services in exchange for either fixed consideration or a percentage of revenues earned by the qualified vendor pertaining to purchases by the Company's franchisees or guests. Fixed consideration is allocated and recognized ratably to each period over the term of the agreement. Variable consideration is recognized in the period when sales to franchisees or guests from vendors are known or cash payment has been remitted. Qualified vendor revenues are recognized within Procurement services revenue. Other revenues. The Company is party to other non-hotel franchising agreements that generate revenue primarily through Saas arrangements. Saas agreements typically include fixed consideration for installment and other initiation fees paid at contract onset, and variable consideration for recurring subscription revenue paid monthly. Fixed consideration is allocated and recognized ratably to each period over the term of the agreement. Variable consideration is determined at the conclusion of each period, and recognized in the current period.Document Page 100 of 202 Choice Privileges is the Company's frequent guest loyalty program, which enables members to earn points based on their spending levels with the Company's franchises. The points, which the Company accumulates and tracks on the members' behalf, may be redeemed for free accommodations or other benefits (e.g., gift cards to participating retailers). The Company 56Document Page 171 of 202 Table of Contents shares of common stock at a total cost of $9.6 million and $5.8 million, respectively. These redemptions were outside the share repurchase program initiated in June 1998. 18. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss is as follows: December 31, 2018 2017 2016 (in thousands) Foreign currency translation adjustments (4,010) $ 2,401) $ (5,362) Deferred loss on cash flow hedge (1,436) (2,298) 3,160) Total accumulated other comprehensive loss S 5,446) $ (4,699) $ 8,522) Cash Flow Hedge In July 2010, the Company entered into an interest rate swap agreement to protect itself from an increase in the market interest rate on $250 million of 10-year, fixed rate debt with the coupon to be set at market interest rates. The interest rate swap agreement was designated as a cash flow hedge under the accounting guidance for derivatives and hedging. In August 2010, upon issuance of the related fixed-rate debt, the Company terminated and settled the interest rate swap agreement for a cash payment of $8.7 million. The Company recorded the effective portion of this deferred loss as a component of accumulated other comprehensive income (loss) and is amortizing it over the term of the related debt as interest expense. The ineffective portion was recognized immediately as a component of earnings under interest expense in the Company's consolidated statements of income. The following represents the changes in accumulated other comprehensive loss, net of tax by component for the years ended December 31, 2018 and 2017: Year Ended December 31, 2018 Year Ended December 31, 2017 Loss on Cash Foreign Foreign Currency Loss on Cash Currency Flow Hedge Items Total Flow Hedge Items Total (in thousands) (in thousands) Beginning Balance S (2,298) $ (2,401) S (4,699) $ (3,160) $ (5,362) $ (8,522) Other comprehensive loss before reclassification (1,609) (1,609) 2.961 2,961 Amounts reclassified from accumulated other comprehensive income 862 862 862 862 Net current period other comprehensive income (loss) 862 (1,609) (747) 362 2,961 3,823 Ending Balance S (1,436) S (4,010) $ (5,446) $ (2,298) $ (2,401) $ (4,699) The amounts below were reclassified from other accumulated other comprehensive income (loss) to the following line items in the Company's Consolidated Statements of Income. There is no income tax expense (benefit) attributable to these components. Amount Reclassified from Accumulated Other Affected Line Item in the Consolidated Statement of