Hershey vs. Tootsie Roll - Ratio Analysis

1030 Words Feb 7th, 2010 5 Pages
Financial Statement Analysis Project--Hershey Corp. & Tootsie Roll Industries

Liquidity

Based on the ratio analysis performed, it appears that the Hershey Company’s liquidity is sufficient to meet cash needs and current obligations. The current ratio and current debt coverage ratios were decreasing from 2002 through 2004, which corresponds to an increase in short-term debt and a decrease in cash on the Company’s balance sheet over the same periods. Hershey attributes the increase in debt to corporate consolidations, capacity expansion, and modernization and efficiency improvements. Outside of the increase in debt, accounts receivable turnover and average days’ collections appear to be steady, which indicates that Hershey is able to
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Profitability

Hershey’s ratios indicate that the Company’s ability to earn income is increasing across the periods analyzed. Increasing profit margins and gross profit rates indicate that the Company is managing its costs effectively. Increasing return on assets indicates that the Company has been effectively using its assets to generate earning power. The Hershey Company appears to be profitable and is effectively managing costs and resources to generate increased income and provide greater return to its investors, demonstrated by increases in return on equity and earnings per share.

Although all of Tootsie Roll’s profitability ratios decreased slightly between 2002 and 2004, the results appear fairly consistent. This Company appears to provide a steady profit and rate of return to its investors. Its profit margins and return on equity are slightly higher than that of Hershey, although both companies appear solid in their ability to generate profits. The stock price has also fluctuated less, providing a steady price/earnings ratio. This is another indicator of a strong, steady performance by Tootsie Roll Company, and stable profitability results.

As of 2008, Hershey Company still appears to be providing strong investor returns. Although its profit margin has decreased, its gross profit rate has remained steady, indicating that the Company is still effectively
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