Investors seeking to preserve capital in a volatile environment might consider large-cap stocks such as Marriott International Inc (NASDAQ:MAR) a safer option. Risk-averse investors who are attracted to diversified streams of revenue and strong capital returns tend to seek out these large companies. But, the key to extending previous success is in the health of the company’s financials. This article will examine Marriott International’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into MAR here. Check out our latest analysis for Marriott International

How does MAR’s operating cash flow stack up against its debt?

Over the past year, MAR has ramped up its debt from US$4.11B to US$8.51B , which comprises of short- and long-term debt. With this increase in debt, the current cash and short-term investment levels stands at US$858.00M for investing into the business. On top of this, MAR has generated US$1.58B in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 18.60%, meaning that MAR’s current level of operating cash is not high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In MAR’s case, it is able to generate 0.19x cash from its debt capital.

Can MAR pay its short-term liabilities?

With current liabilities at US$5.15B, it seems that the business is not able to meet these obligations given the level of current assets of US$3.37B, with a current ratio of 0.65x below the prudent level of 3x.

Is MAR’s debt level acceptable?

Since equity is smaller than total debt levels, Marriott International is considered to have high leverage. This isn’t surprising for large-caps, as equity can often be more expensive to issue than debt, plus interest payments are tax deductible. Accordingly, large companies often have an advantage over small-caps through lower cost of capital due to cheaper financing. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In MAR’s case, the ratio of 9.72x suggests that interest is well-covered. Large-cap investments like MAR are often believed to be a safe investment due to their ability to pump out ample earnings multiple times its interest payments.