Hershey Foods vs. Tootsie Rolls

1427 Words Sep 3rd, 2010 6 Pages
Investment:
Heshery Foods versus Tootsie Rolls Financial Comparison A comparison of 2004 Hershey’s and Tootsie Roll, questions needed to determine which company is better off: Are the company’s operations profitable?
To consider this I will be looking at the Income Statement. If the company’s revenue exceeds its expenses it will report net income or will report a net loss. This will report on the success or failure of the company’s operation by reporting its revenue and expenses.
Hershey Foods reports a net income of $590,879 and Tootsie Roll Industries report a net income of $64,174. Overall, both company’s report a net gain. However, Hershey Foods net income is larger than that of Tootsie Roll Industries by $526,705. Does the
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A higher value suggests favorable return on each dollar of sales.
Hershey Foods profit margin ratio 13.3% represents a low favorable return on each dollar of sales. As for Tootsie Roll Industries the ratio is 15.3% which is low. However, Hershey Foods ratio is less favorable than Tootsie Roll Industries. How long is an item in inventory?
To consider this we need cost of goods sold; beginning and ending inventory. The higher the ratio or lower average days in inventory suggest that management is reducing the amount of inventory on relative to sales.
Hershey Foods inventory ratio is 4.80 and days in inventory are 76 days. As for Tootsie Roll Industries the inventory ratio 4.5 and days in inventory is 81 days. Both represents that management is not reducing the amount of inventory compare to sales. Overall, Hershey Foods is better of then Tootsie Roll. Are collections being made in time fashion?
To consider this we need net credit sales and average receivable balance. This ratio indicates average collection period should be consistent with corporate credit policy. An increase suggests a decline in financial health of customers.
Hershey Food Receivable turnover ratio is 10.8 and average collection period is 33.8. As for Tootsie Roll the ratio is 10.8 and average collection period is 33.8. Overall, both companies have low ratios which indicate there is no decline in financial health of customers. Is the company using its assets effectively?
To consider
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