Financial Analysis

Hilton Hotel Incorporation vs. Marriot International & Starwood Hotels & Resorts

By: Simranjit Dhillon

MBA 6150

August 14, 2011

Agenda:

Executive Summary-----------------------------------------------------------------------Pg 3

Company and Competitor Description-----------------------------------------------Pg 5

Financial Analysis

Ratio--------------------------------------------------------------------------------Pg 7

Accounts--------------------------------------------------------------------------Pg 14

Common Size Statements------------------------------------------------------------Pg 18

References-------------------------------------------------------------------------------Pg 21

Executive Summary:

Hilton Hotel Incorporation released its financial statements for its previous fiscal year 2010 because it keeps its stakeholders both externally and internally aware of the company’s financial position during fiscal year 2010. At first glance at Hilton Hotel Incorporation’s financial statements, the impression that its stakeholders receive from the dollar amounts is that the company had a successful fiscal year 2010. However, it is important for investors, creditors and management to acknowledge that the only sound and accurate method of portraying its financial standings is through ratio analysis. This mainly due to the fact that its large dollar amounts and corporate size does not really show the accurate relationship between the various accounts such as debt to equity, which measures total liabilities against total equity or profit margin that measures profit made from net sales. Ratio analysis allows its stakeholders to easily compare Hilton’s financial standing within its industry and against its competitors.

Through the ratio analysis, it is truly obvious that Hilton’s business combination efforts, which is reflected as a business acquisition of Hilton International in their accounting books and financial statements. This resulted in their profitability ratios being lower than their previous years and their competitor, Marriott International and Starwood Hotels and Resorts. At the same time, its financial leverage ratios which include their debt ratio and debt to equity ratio showed a significant increase from their previous years. It was also a larger amount than Marriott’s financial leverage ratio. This means that Hilton utilized financial leverage in their business combination efforts because it increase their amount of liabilities compared to amount in equity. The acquisition act shows up as a ripple effect throughout their financial statements, both balance sheet and Income statement because the accounts on both were impacted. For example, acquisition increased their assets, which shows up on balance sheet and increases their operational expenses, which is found on the Income Statement. Another result of this acquisition is that its liabilities are increased and at the same time, it reduces its cash and equivalents account on the balance sheet. Thus, it is important to include its acquisition into the analysis of its financial position and statements because if it is not added inconsideration then stakeholders will get the impression that its success took a dive. With this in mind, investors will have a better perspective on Hilton’s financial status and enable them to make better investment decision. This understanding will help Hilton maintain its market price of its common share so that its investors can make a profit.

Company and Competitor Description:

Conrad Hilton purchased his first hotel in 1919 and for more than 85 years, it has grown to become synonymous with the definition of a luxury hotel chain. Its portfolio currently includes 2,800 hotels worldwide and it