What financial problems do they currently have?

What financial problems do they currently have?• How are the profits of the organization• Over the last two years what do you see?Student recommendations for the organization (examples):• What could the company do to grow?• What areas does the company need to improve upon?• What is the financial outlook for the company?Students own original thought is used.• Information provide that is not students own work is properly sited• Ideas and perspectives are not plagiarized from the internet• Student gives personal ideas and recomendations——————————————————————This is the paper sampleReview of 2015 Financial Statements of Hilton Worldwide Holdings Inc.IntroductionThis paper will attempt to review the financial statements for Hilton Worldwide Holdings Inc. for year ending December 31, 2015. Reports reviewed will include the Balance Sheet, Statement of Income, and Statement of Cash Flow. From the information provided, an attempt will be made to gauge the health of the company, an analysis of revenues, observations and recommendations for the future. In addition and when possible, a side by side comparison of financial statements between Hilton Worldwide and Marriott International will be conducted to establish differences in performance. Financial Statements for hospitality companies are important as each statement provides a measurement of success or failure, provide an understanding of performance of a hospitality company and a period of time snap-shop of profits and amount of cash generated for a better understanding of company health. In addition, as publicly a publicly traded company, Hilton Worldwide and Marriott International financial statements also provide the following; provide investors insight into company performance and potential future investments, ensure proper tax assessments by taxation authorities, fulfill the requirement by the Securities and Exchange Commission for disclosure, provide competitors a vis-à-vis review of successes and failures, allow creditors to gauge the ability of a company to re-pay loans and of course provide management and employees a window into the health of the company. Balance SheetThe first statement to be reviewed is the Balance Sheet which includes Assets, Liabilities, and Stockholder Equity for Hilton Worldwide. Assets are equal to liabilities and stockholder equity, and given the importance and value of the report, it would be safe to assume the general accounting equation on the report would add up accordingly. Total assets are listed as over $25 billion USD. Current asset to liability ratio is 1.4:1 for Hilton while Marriott in comparison is .42:1 indicating that Hilton is more liquid, better prepared to pay debts and meet unexpected needs for cash, than Marriott. Upon closer examination, a year over year comparison provides some observations on Property and Equipment Net Held for Sale for Hilton. The Waldorf Astoria New York was sold in 2015 thus the amount held in 2014, $1.513 billion USD, is indicated as $0 in 2015 since the sale was completed. In addition, Cash and Cash Equivalents increased by $43 million USD year over year, equivalent to an 8% increase. In comparison, Marriott lists $6.8 billion USD in assets and a reduction of Cash year over year by 7%. Marriott International sold property including an International hotel, a New York hotel, and a Miami Beach hotel that reduced the Assets Held for Sale from $233 million USD to $78 million at year end 2015 (2015 Annual Report, 2016, p. 64). It should be noted; both companies are in the midst of large changes that include a merger between Starwood and Marriott (Crowe, 2016) and for Hilton, the spin-off of owned properties through an REIT and the spin-off the timeshare division (Beilfuss, 2016). These will have large impact on future financial statements for both companies. Stock holder equity in the meantime increased by almost $1.2 billion USD over 2014 for Hilton. The net impact from a reduction of Goodwill, Brands, Deferred Income Tax Assets and other tangibles resulted in a decrease in assets year over year by 2% for Hilton. However, Liabilities also decreased by 8%. The working capital ratio is 1.3:1 for Hilton which allows Hilton to pay short term debt obligations. Marriott in comparison had an increase in Long Term Debt year over year by 10%, an increase in assets by 11% and a working capital ratio of .75:1 which is not as strong as Hilton’s.The recent financial news that Hilton will be spinning off owned properties into an REIT as well as its timeshare brand, indicates that Hilton appears to be poised for the future (Beilfuss, 2016). By spinning off some of the owned portfolios into a Real Estate Investment Trust, Hilton is able to leverage the core business of hospitality management. This spinoff has two impacts to the Balance Sheet. The first is that the amount of assets will decrease as the company will no longer own the properties that are placed into the REIT. However, a management agreement for the managing of the properties and the continued branding of the hotels under the Hilton flag will then be held under a management agreement. The management and franchise agreements will increase assets, somewhat offsetting the loss of physical properties. In addition, the income tax liability for these properties will no longer be the responsibility of Hilton due to current tax laws. This first step in cutting off owned properties allow for a focus on management and franchise agreements rather than actual real estate. The spin-off of the timeshare division will also have a net decrease on assets but also liabilities. The unloading of properties will also assist in moving away from property ownership and real estate and instead push Hilton towards the core business model of hotel management and franchise agreements while reducing any costs associated with upkeep of properties. The launching of the Tru brand should increase overall Goodwill listed under assets. Goodwill is defined as an intangible item that is greater than the whole of its part through an acquisition or addition of an asset (Gore, 2010, p. 46). Goodwill however, is subject to some debate as the true value are only estimates (Focus, 2016, p. 72) that, although utilize GAAP, may be open to interpretation. With the addition of another brand, the total value of brands listed under assets should increase. The effect of the REIT, timeshare spin off, and addition of Tru will reduce overall liabilities, decrease some assets, while increasing Goodwill and Brand. The Income Statement presented by Hilton affords an opportunity to dissect the profitability of the company.Income StatementThe Income Statement provides profitability over a specific period of time, in this case year end 2015. Hilton reports a net income of $1.4 billion USD after deducting $10.2 billion USD in expenses from $11.6 billion USD in revenues. The revenue to profit percentage is 12.1%. In 2014 the revenues to profit percentage was only 6.5%. This dramatic difference is due to the increase in overall revenues in 2015 by $700 million USD, and a decrease in income tax expenses, $80 million USD in 2015 versus $465 million USD in 2014. According to the annual report, the tax benefit in 2015 is due to a deferred tax benefit as well as a reduction in Goodwill, listed under assets, due to the sale of properties (Focused, 2016, p. 49). The increase in profit is certainly a benefit year over year however, according to the factors impacting revenues in the annual report, the economy is in a current upswing while the ability of Hilton Worldwide Incorporated to develop relationships with franchisees and developers and develop a fee for service model for the timeshare brand helps to drive revenues while also reducing the capital required to expand (Focused, 2016, p. 44). An overall increase in total revenue year over year of only $700 million USD would indicate that the company will need to focus on increasing revenues while reducing expenses. General and administration expenses increased year over year by $200 million USD, a 49% increase, and an in depth review of these expenses should be in order to discover any waste as this may be due to an increased cost of sales as well as increased general admin costs. Although the revenue to profit ratio may be considered robust in 2015, 12% compared to Marriott’s 6%, it appears that large amounts of expenses continue to accumulate including the expenses associated with the owned and leased hotel portfolio. Some of the leases mentioned in Note 17 of the report indicate that equipment and capital costs associated with the real estate are the responsibility of Hilton (Focused, 2016, p. 89). In addition, as stated in the same note, the lease agreements may include rent based on revenues. The liabilities associated with these lease agreements may be detrimental to the overall profit of the company if more favorable terms cannot be negotiated. Statement of Cash FlowCash flow is the amount of cash that comes into a company as well as the amount of cash that flows out of a company. The net cash held for Hilton for 2015 is $609 million USD and this constitutes an increase of $43 million USD over 2014, or 7.5%. The net income from activities is represented by $1.786 billion USD and includes proceeds from the sale of assets. The total funds flowing out of the company total $1.743 billion USD. The repayment of debt, $1.6 billion USD, increased year over year by 14%, however, borrowings decreased by $302 million USD year over year or 86%. The focus on repayment of debt, funds borrowed to purchase the Hilton by Blackstone in 2007, appears to be a focus of the company while limiting future borrowing. In essence, it appears Hilton is borrowing less while paying off current loan amounts. The profit margin for Hilton is 13% while for Marriott it is 6% indicating that Hilton has a more robust profit margin than its largest competitor.The first concern on the Statement of Cash Flow is the amount of cash on hand. Currently, this is indicated as $609 million USD, again an increase over 2014. However, indicated within the Balance Sheet under liabilities is the amount of $2.2 billion USD in Accounts Payable while only $876 million USD in Accounts Receivable. Using a simple analysis and assuming that all money that is owed to Hilton is paid on time, if the receivables amount of $876 million USD is added to the cash on hand amount of $609 million USD, then in the event of the requirement of payment of debts or an immediate need for funds, Hilton would still be $715 million USD short on the amount of payables owed, almost twice the amount of what is held in cash. Certainly, the flow of funds into and out of Hilton appear healthy, however, there may be future cause for concern in the event of a dramatic downturn of the economy due to world events such as terrorist activities. The economy and hospitality is in a current upswing, however, world events may swing the pendulum the other way in short order.There is also a danger in the assumption of net revenues used to gauge the health of a company by creditors and investors instead of also reviewing cash flow. Certainly, each statement plays a role in understanding the loss, gain, strategy and overall health of Hilton Worldwide. However, relying solely on net revenue as it pertains to Hilton may be somewhat dangerous. Instead, a review of cash flows along with the Income and Balance Sheet statements will help judge the stability of a company. For instance, noted in the annual report is how revenues in Timeshare are calculated. Under Note 2, Hilton specifies that timeshare sales are calculated when a purchaser of timeshare has put a set amount down, the period allowing for cancellation of the purchase has expired, a contract has been signed to purchase, and the receivable, payment for the purchase, can be collected (Focused, 2016, p.75). Since very few timeshare purchases are paid in full at the time of the purchase in cash, the room, interval, or timeshare membership is financed. However, this revenue, although not fully counted for the entire length of the loan under revenues, assumes that future payments of the loan will be forthcoming including finance interest of the loan. Any major downturn of the economy that would also impact the credit market would most likely translate into timeshare purchaser’s stop payment of loans on timeshare intervals and locating financing with agreeable terms to the funder as well as the end user and therefore, both of these issues would impact future revenues. This may be a moot point however, since Hilton is expected to spin off the timeshare division.ConclusionThe title of the 2015 Hilton Annual Report is named “Focused” that may be interpreted as a focus on company financial performance. On pages 1 and 2 of the report a message from Chris Nassetta, President and CEO Hilton Worldwide, indicating performance results not only from financials but also from overall hotel metrics including RevPAR, amount of sleeping rooms in the pipeline and the amount of HHonors members (Focused, 2016 p.1-2). Marriott, on its annual report also states the gains of hotel metrics of RevPAR. Ironically, both companies are not that far apart from each other, Hilton being at 5.2% growth while Marriott at 5.0% in RevPAR growth. However, although impressive, the true quality of any company should be also measured by financial statements. The profit margin with Hilton is healthy at 13% while Marriott has a profit margin of only 6%. In any industry, a higher profit margin is always beneficial to the company and the shareholders. The spin-off of real estate and timeshare and, along with them, the liabilities associated with each will allow Hilton to focus on the core hotel management and franchise products. The launching of the Tru brand with a focus on budget travelers can be seen as increasing the strength of the brand, increasing Goodwill under assets, and an overall increase to the Hilton brand as well. However, given the current competition among budget properties, the unfamiliar nature of the product by the traveler, and the time it takes to develop a core brand, the expansion of the Tru brand may be premature and I would have waited until a downtown of the economy and the market stretching that follows to reap the rewards of budget travelers as well as the benefits to the balance sheet impacting Goodwill and Brand assets. On the Income Statement, increases in gross profit will provide a better picture to investors, however costs such as administration expenses will need to be kept in check in order to drive an aggressive revenue to profit ratio. A thorough review of these costs needs to be taken seriously considering the year over year increase. Lastly, the liquidity from the cash on hand is a concern considering the amount of debt that is being carried. Certainly, removal of the timeshare entity post separation will yield results, however, the small amount of cash on hand as well as the difference between receivables and payables is quite large. An aggressive payment of debts may hinder available cash so an appropriate approach to debt payment should be taken into consideration. Total assets provided by creditors are 45.6% for Hilton and is better than Marriott’s debt to asset ratio of 67.53%. Overall, given the amount of debt currently being carried by Hilton, the overall performance and guidance of leadership has helped the company expand while reducing obligations, therefore, a balanced approach to debt obligations and future borrowing, reducing liabilities as well as management of cash should be the focus for Hilton in the future. I applaud both Marriot and Hilton leadership, in fact any large hotel company today, given some of the challenges each is facing and the capital required to succeed in hospitality.Please write according to the requirements provided above, and the works cited. There is the paper sample. Just as a reference for writing this paper.