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Question: consolidated balance sheets usd in thousands jun...

Question details
Consolidated Balance Sheets - USD ($) $ in Thousands Jun. 30, 2018 Dec. 31, 2017
Current assets
Cash and cash equivalents $ 37,148 $ 235,336
Receivables (net of allowance for doubtful accounts of $14,087 and $12,221, respectively) 186,034 125,870
Income taxes receivable 50 0
Notes receivable, net of allowance 29,237 13,256
Other current assets 30,683 25,967
Total current assets 283,152 400,429
Property and equipment, at cost, net 112,567 83,374
Goodwill 173,741 80,757
Intangible assets, net 248,469 100,492
Notes receivable, net of allowances 78,921 80,136
Investments, employee benefit plans, at fair value 20,349 20,838
Investments in unconsolidated entities 133,478 134,226
Deferred income taxes 23,310 27,224
Other assets 49,029 67,715
Total assets 1,123,016 995,191
Current liabilities
Accounts payable 72,266 67,839
Accrued expenses and other current liabilities 73,940 84,315
Deferred revenue 58,190 52,142
Current portion of long-term debt 1,099 1,232
Liability for guest loyalty program 81,178 79,123
Total current liabilities 286,673 284,651
Long-term debt 795,124 725,292
Long-term deferred revenue 103,754 98,459
Deferred compensation and retirement plan obligations 24,866 25,566
Income taxes payable 29,041 29,041
Deferred income taxes 0 39
Liability for guest loyalty program 48,592 48,701
Other liabilities 38,918 42,043
Total liabilities 1,326,968 1,253,792
Commitments and Contingencies
SHAREHOLDERS' DEFICIT
Common stock, $0.01 par value, 160,000,000 shares authorized; 95,065,638 shares issued at June 30, 2018 and December 31, 2017 and 56,633,606 and 56,679,968 shares outstanding at June 30, 2018 and December 31, 2017, respectively 951 951
Additional paid-in-capital 204,899 182,448
Accumulated other comprehensive loss (5,282) (4,699)
Treasury stock (38,432,032 and 38,385,670 shares at June 30, 2018 and December 31, 2017, respectively), at cost (1,112,376) (1,064,573)
Retained earnings 707,856 627,272
Total shareholders’ deficit (203,952) (258,601)
Total liabilities and shareholders’ deficit $ 1,123,016 $ 995,191

1. Does total assets equal total liabilities and shareholders' Ddficit? What are the amounts of each in 2018?

2. Look at the line items in shareholders' deficit. Which items are negative? How much is ”accumulated other comprehensive loss”? How much is the negative amount in treasury stock?

10. Now that you understand the basic facts of Choice Hotels, we will calculate balance sheet ratios. Most finance textbooks start with the current ratio and the quick ratio. These ratios were designed for manufacturing companies, not service companies like Choice Hotels. And they are important for companies starting out in business. For Choice Hotels, there is no inventory so the ratios will be the same: current ratio = current assets / current liabilities; quick ratio = (current assets minus inventory) / current liabilities. Please calculate the current ratio for both 2017 and 2018 balance sheets.

11. The debt to total assets ratio is defined many different ways. In one definition, debt includes only liabilities on which the company pays interest. For Choice hotels this will include long-term debt and current portion of long-term debt. Calculate the debt ratio for June 30, 2018 and December 31, 2017.

12. Before companies bought large amounts of their own stock for treasury stock, fnancial analysts would calculate the debt to equity ratio. Since the balance sheet of Choice Hotels shows negative equity, this ratio makes no sense. In recent years, analysts have looked at the total stock market value of the company. As of September 28, 2018 according to Yahoo Finance, Choice Hotels has a total stock value called market cap (capitalization) of $4.7 billion. The total equity on the financial statements as of June 30, 2018 was a negative $204 million. Calculate the debt to equity ratio using $4.7 billion for equity.

13. Another calculation that is important for manufacturing companies is working capital. Of course, Choice Hotels manufactures nothing. But this will be good to know. Working capital is current assets minus current liabilities. Calculate working capital for Choice for June 30, 2018 and December 31, 2017.

14. Choice has unusual liabilities. One is the liability for the guest loyalty program. What is that for?

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