A Comparative Anlysis of Hershey Company and Tootsie Roll Industries
800 Words4 Pages
Overall Tootsie Roll has better liquidity. Liquidity measures the short-term ability to pay obligations as they are expected to be due within the next year.
When working capital is a positive number, there is a higher likelihood that the company will be able to pay it liabilities. Is this case Tootsie Roll is more likely to be able to pay their liabilities because they have a positive working capital and Hershey’s is negative.
The current ratio indicates the ability to pay on maturing obligations and to be able to meet unexpected cash needs. Again in this case Tootsie Roll has a higher probability of being able to pay their obligation and meet their unexpected cash needs. They have a $2.34:1 ratio…show more content… Solvency is the ability to pay interest as it comes due and to repay the face value of debt at maturity. The only questionable value is Tootsie Roll’s their free cash flow.
Debt to total assets ratio measures the percentage of assets financed by creditors (not stockholders). Debt finance is more risky than equity finance because they must be paid whether a company is doing well or not. Tootsie Roll has a 28% debt to total assets ratio while Hershey’s is 71% indicating that Hershey is taking a higher risk.
Cash debt coverage ratio indicates the ability to repay liabilities from cash generated from operations without having to liquidate assets such as property, plant, and equipment. Although the values of both companies are close, Tootsie Roll has a higher ability to generate cash from operations to repay liabilities.
Times interest earned ratio shows an indication of a company’s ability to meet interest payments as they come due. Tootsie Roll has a much higher probability of meeting the interest payments as they are due.
Free cash flow is the cash remaining from operations which indicates the company’s ability to generate cash. In this case Hershey has a much higher free cash flow amount which indicates they have a higher ability to generate cash. This calls into question Tootsie Rolls ability to repay long-term obligations.
Every value in the profitability