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Quick Ratio Analysis

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Quick ratio Quick ratio of a company is the ratio of sum of cash, cash equivalent, accounts receivable and marketable securities to its current liabilities. It measures short term solvency position of a company with respect to its payment ability from most liquid assets. In this study, it has been observed that IHG's quick ratio in 2009, 2010, 2011, 2012 and 2013 were 0.39, 0.49, 0.62, 0.76 and 0.63 respectively. Quick ratios of IHG has rose consistently from 2009 to 2012 and then dropped in 2013. The corresponding quick ratios of Marriot international were 0.42, 0.58, 0.38, 0.40 and 0.45 respectively. The Marriot ROIs displayed increasing trend from 2010 however ended up much lower than that of IHG in 2013 (Block and Hirt, 1978). The 2013 …show more content…

The facts and figures about debt to equity ratio reveals that this ratio from IHG from 2009 to 2013 was 9.56, 2.86, 1.22, 4.03 and 3.39 respectively. The corresponding Marriot international debt to equity ratios were 1.96, 1.70, 1.30, 1.20 and 1.05 respectively. The debt to equity ratio that is considered favourable in the industry is 0.5 as it indicates that debts are 50% of equity in the capital structure (Brag, 2007). However, this ratio for all the years for both the companies has been much higher and the main reason behind this is high debt funding to implement competitive strategies, marketing strategies and technological up gradations. However, if compared on the basis of debt to equity ratio, Marriot international is in a better position than IHG. Long term solvency position of both the companies is …show more content…

The 10% stake should be bought after the revenues and decision criteria figures become equal to or more than the industry averages, long term projections look good and market emotions become positive (Agar, 2005). Recommendations Recommendation 1: Since long term solvency position of OHG and Marriot international are not good, long term investments should not be done in either of these companies. Recommendation 2: Since short term solvency position of IHG is comparatively better than that of Marriott international, short term investments can be done in IHG. Recommendation 3: Since revenue, gross profit margin, net profit margin and operating profit margins are lower than the industry average, long term historical growth and projections are not up to the mark, competitive pressures are high and market emotions are low, IHG should not buy 10% stake of Marriot International rather should continue to monitor its performance and wait for favourable market conditions to

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