Tootsie Roll vs Hershey

In: Business and Management

Submitted By camcon2
Words 4404
Pages 18
Tootsie Roll Vs Hershey The purpose of this financial analysis is to compare Tootsie Roll and Hershey Inc to the industry average financial ratios to determine which company will be the best investment opportunity. This analysis will evaluate and compare the company’s liquidity, solvency and profitability ratios from 2004.

Tootsie Roll, Inc. and Hershey Inc are both companies well known for the selling of confectionary goods. Hershey is publicly traded under NYSE: HSY, Tootsie Roll under NYSE: TR. Both are listed under SIC 2064, Candy and other Confectionary products.

• Liquidity

Liquidity ratios measure the short-term ability a company to pay its obligations and meet unexpected needs of cash. These numbers can be found by analyzing the company’s balance sheet. The company that closely matches or exceeds the industry averages in liquidity is Tootsie Roll. Tootsie Roll’s current ratio of 2.34 exceeds that of the industries 1.29. They also have a lower cash to debt ratio 1.05 (2.37 industry, days in inventory 63.98 (industry 72.7) and a quicker inventory turnover 5.7 (industry 6.05). The only ratio were Hershey exceeds Tootsie Roll is receivables turnover ratio. Hershey collects more of its receivables but Tootsie Roll collects faster. Tootsie Roll is better suited to collect cash quickly to pay its obligations and meet unexpected cash needs.

• Solvency

Solvency ratios measure a company’s ability to last over an extended period of time, or how a company will far in the long run. These ratios are also generated by analyzing the company’s balance sheet. Tootsie Roll and Hershey ratios show both have the ability to last over an extended period of time. Both companies show a ... inancial Analysis: Hershey Corp. & Tootsie Roll Industries
Hershey and Tootsie Roll are both companies in the confection industry. We compared both companies…...

Similar Documents

Tootsie Roll Industries

...Tootsie Roll Industries Inc. Loan Request Patricia Duncan, Sean Duncan, Heidi Oppegard, and Michelle Rodriguez Accounting ACC/561 January 7, 2012 Jared Jones Tootsie Roll Industries Inc. Loan Request Tootsie Roll Industries is a confectionery products manufacturer that has been in business for 111 years. The company makes a variety of products including a) Tootsie Roll, b) Tootsie Roll Pops, c) Caramel Apple Pops, d) Charms, e) Blow Pops and a number of other sweet treats. The company believes in hiring and retaining quality personnel while maintaining a professional yet open family atmosphere. Tootsie Roll Industries is looking to expand the business; therefore, the business is requesting a loan to successfully implement the expansion. Discussed below is detailed information regarding Tootsie Roll Industries current financial position, how Tootsie Roll Industries plans to implement the funds from the loan, and how the funds will promote future company growth. Financial Statement Summary….Michelle (~375 words) (due Jan 7th) A General financial statement summary is important when requesting a loan for expansion or any other reason like inventory purchases or debt retirement. The Tootsie Roll Company has four important financial statements that reflect important information in order to obtain their loan. Ahead I will explain the details relevant to the Tootsie Roll Company in relation to their revenues,......

Words: 796 - Pages: 4

Tootsie Roll

...2009, p. 673). The liquidity of Tootsie Roll Industries has a positive amount of working capital and a favoring current ratio in both 2006 and 2007. The Tootsie Roll Company has the ability to pay off its liabilities. When a manager views the liquidity of the Tootsie Roll Company, the current ratio shows that for every dollar of liabilities in 2007, there was $3.45 worth of current assets. Liquidity 2007 2006 2005 Working Capital $141754 $128706 NA Current ratio 3.45 3.07 NA Current cash debt coverage 1.50 0.93 1.37 Chapter 13 states, “Profitability ratios measure the income or operating success of a company for a given period of time” (Kimmel, Weygandt, & Kieso, 2009, p.674). Profitability for Tootsie Roll Industries has declined from 2005 to 2007. The profit margin rate fell from 16% to 10%, while the asset turnover ratio slightly increased from 2005 to 2007. According to chapter 13, the asset turnover ratio “measures how efficiently a company uses its assets to generate sales” (Kimmel, Weygandt, & Kieso, 2009, p.690). Profitability 2007 2006 2005 Earnings Per Share 0.94 1.18 1.36 Gross profit rate 0.33 0.37 0.39 Profit margin ratio 0.10 0.13 0.16 Return on Assets ratio 0.13 0.16 0.19 Asset turnover ratio 1.22 1.23 1.21 Solvency, according to Chapter 13, measures how a company survives over a period of time (Kimmel, Weygandt, & Kieso, 2009, p.673). Tootsie Roll Industries assets are 21%......

Words: 1172 - Pages: 5

Analysis of Hershey and Tootsie Rolls

...Hershey’s Company and Tootsie Roll Industries are both makers of confectionary products, mainly chocolate and other candies. Both companies have been making these products since the early to middle 1890’s and market their products worldwide. Hershey’s is the larger company of the two. To show perspective of how much larger Hershey’s is, they had a net sale of over 5 billion dollars in 2008. Tootsie Roll’s net sales in 2008 were $492 million. However, I will be looking at and comparing their financial data from 2002 to 2004 to each other and to the 2004 industry average. Accounting ratios I will be looking at include liquidity ratios, solvency ratios, and profitability ratios. Liquidity ratios show the ability of a company to pay back their short-term obligations. A few examples of these ratios are the current ratio, current cash debt coverage ratio, accounts receivable turnover ratio, average collection period, inventory turnover ratio, and days in inventory. Starting with the current ratio, I found that Hershey’s Co. did quite well in 2002 and 2003 but fell sharply in 2004. This was due to a large increase in liabilities in 2004 compared to the other years. The industry average for 2004 was .90 and their current ratio that year was .92 so they are just slightly above it. Tootsie Roll fared much better in all 3 years with its current ratio never going below 2.34. Companies with ratios over 2.0 are considered to be very stable in their short-term financial standing. Another......

Words: 958 - Pages: 4

Tootsie Roll

...Tootsie Roll Industries The Hershey Company Interpretation and comparison between the two companies' ratios Ratios (pg 735) Ratio Receivable Turnover Ratio (Net Sales/(Average Accounts Receivable) $497,717/ (($32,371+$35,075)/ 2) = 14.76 $4,946,716/(($487,285+$522,673)/ 2) = 9.80 This ratio compares net sales divided by the average accounts reciavable. Tootsie Roll has far less sales but has to extend less credit on average to collect the full amount owed. By placing purchases in accounts recievable a business is able to generate more sales but does so by offering in essence an interest free loan to the customer. The accounts recievable indicates that both businesses are able to collect on their debts quickly. Since Tootsie has a higher percentage recievable turnover ratio they often have a relatively higher amount of cash on hand for running the business. Average Collection Period (365/Recievables turn over ratio) page 402 365/14.76 = 24.7 days 365/9.80 = 32.2 days The average collection period indicates that Tootsie Roll is able to convert an accounts reviable item into cash just under 8 days faster than Hershey Company. Tootsie has a greater likelihood of meeting its financial obligations since it is more likely to promptly recieve payment. One factor that may influence the interpretation of this result is the terms by which each business extends credit. For example if both companies extend credit under net 30 terms, Tootsie is more......

Words: 773 - Pages: 4

Hershey and Tootsie Roll

...and Management Tootsie Roll Tootsie Roll Industries The Hershey Company Interpretation and comparison between the two companies' ratios Ratios (pg 735) Ratio Receivable Turnover Ratio (Net Sales/(Average Accounts Receivable) $497,717/ (($32,371+$35,075)/ 2) = 14.76 $4,946,716/(($487,285+$522,673)/ 2) = 9.80 This ratio compares net sales divided by the average accounts reciavable. Tootsie Roll has far less sales but has to extend less credit on average to collect the full amount owed. By placing purchases in accounts recievable a business is able to generate more sales but does so by offering in essence an interest free loan to the customer. The accounts recievable indicates that both businesses are able to collect on their debts quickly. Since Tootsie has a higher percentage recievable turnover ratio they often have a relatively higher amount of cash on hand for running the business. Average Collection Period (365/Recievables turn over ratio) page 402 365/14.76 = 24.7 days 365/9.80 = 32.2 days The average collection period indicates that Tootsie Roll is able to convert an accounts reviable item into cash just under 8 days faster than Hershey Company. Tootsie has a greater likelihood of meeting its financial obligations since it is more likely to promptly recieve payment. One factor that may influence the interpretation of this result is the terms by which each business extends credit. For example if both companies extend credit under net 30 terms, Tootsie is more......

Words: 340 - Pages: 2

Tootsie vs Hershey

...When evaluating the liquidity of Tootsie and Hershey, both organizations hold fairly strong positions with respect to its ability to meet their current and expected short term, less than one year, obligations. Upon reviewing the current ratio, Tootsie holds a very strong position with over 2 times the current assets versus current liabilities. While the figure is favorable, it does suggest perhaps that their ratio may be too high and that they are not efficiently using its current assets. Though, they have be specifically improving on this aspect since their ratio did decline from 3.9 in 2003 to 2.3 in 2004. Hershey’s current ratio is not nearly as strong as Tootsie’s, coming in at .93 in 2004 down from 1.93 in 2003 but in comparison to the industry average of 1.1 it is still within an acceptable range but has steadily decreased since 2002 when it was 2.3. This may be suggestive of a decision to purposely reduce their liquidity. This leads into the current cash debt coverage ratio analysis, which helps adjust for the current ratio only calculating year end figures, and utilizes the company’s cash provided by opertions to account for the entire year. Tootsie’s current cash debt coverage ratio is more favorable coming in at 1.05 versus Hershey’s ratio of .85. However, both exceed the acceptable level recommended of .40, showing both have adequate liquid positions. In further reviewing the liquidity of both company’s and looking at the accounts receivable turnover ratio, which...

Words: 1067 - Pages: 5

Tootsie vs. Hershey

...Tootsie Roll Insustries Ratio The Hershey Company Ratio Interpretation and comparsion between the two companies' ratio Earnings Per Share $0.94 $0.96 EPS measures the net income earned on each share of common stock. Hershey's earning per share appers to be $0.02 higher than Tootsie's earnings per share as a result of more effective and effitient management. Current Ratio 3.45 0.88 Tootsie Roll Industries shows higher current ratio for 2.57 which means that it is more liquid than The Hershey Company. This company has more ability to pay its maturing obligations and meet unexpected needs for cash. Gross Profit Rate 0.34 (34%) 0.33 (33%) Tootsie Roll Industries has 1% higher gross profit rate compared to The Hershey Company. That shows higher gross profit margin for this company. Profit Margin Ratio 10.37% 4.33% Tootsie Roll Industries has 6.04% higher profit margin ratio. This company has 10.37% of each dollar of sales that results in net income. Higher gross profit rate results in higher profit margin for the company. Inventory Turnover Ratio 5.71 5.52 The numbers show that Tootsie Roll Industries has higher Inventory Turnover Ratio than The Hershy Company for 0.19. That means that Tootsie Roll Industries sell their goods faster and their average inventory turns 1.03 times/year faster than The Hershey Company's Inventory. Days in Inventory 64...

Words: 280 - Pages: 2

Tootsie Roll vs Hershey Co.

...Tootsie Vs. Hershey Tootsie Roll Insustries Ratio The Hershey Company Ratio Interpretation and comparsion between the two companies' ratio Earnings Per Share $0.94 $0.96 EPS measures the net income earned on each share of common stock. Hershey's earning per share appers to be $0.02 higher than Tootsie's earnings per share as a result of more effective and effitient management. Current Ratio 3.45 0.88 Tootsie Roll Industries shows higher current ratio for 2.57 which means that it is more liquid than The Hershey Company. This company has more ability to pay its maturing obligations and meet unexpected needs for cash. Gross Profit Rate 0.34 (34%) 0.33 (33%) Tootsie Roll Industries has 1% higher gross profit rate compared to The Hershey Company. That shows higher gross profit margin for this company. Profit Margin Ratio 10.37% 4.33% Tootsie Roll Industries has 6.04% higher profit margin ratio. This company has 10.37% of each dollar of sales that results in net income. Higher gross profit rate results in higher profit margin for the company. Inventory Turnover Ratio 5.71 5.52 The numbers show that Tootsie Roll Industries has higher Inventory Turnover Ratio than The Hershy Company for 0.19. That means that Tootsie Roll Industries sell their goods faster and their average inventory turns 1.03 times/year faster than The Hershey Company's Inventory. Days in Inventory 64 66 The numbers show that Tootsie Industries helds its inventory an average of 64 days which is 2 days......

Words: 279 - Pages: 2

Tootsie Roll Company Overview

...Bushra Accounting 153 Term Paper I. Tootsie Roll Company Overview • Tootsie Roll is one of the largest candy companies within our country • Their confectionary products are distributed to over 75 countries worldwide • Their largest customer is Walmart; their market mainly consists of retailers and candy distributors • Tootsie Roll employs about 2,200 people II. Liquidity Ratios • Working Capital Year Tootsie Roll Hershey 2011 $153,846 $872,783 2010 $176,662 $706,372 2009 $155,812 $474,806 2008 $129,967 $74,733 • Current Ratio Year Tootsie Roll Hershey 2011 3.64:1 1.74:1 The industry average is 2010 4.02:1 1.54:1 1.50:1 2009 3.78:1 1.52:1 2008 3.22:1 1.06:1 Both Tootsie Roll and Hershey have good liquidity ratios. Tootsie Roll’s working capital shows that the company should be able to pay off its’ liabilities or debts. Tootsie Roll is performing at above the industry average, which shows that the company has great liquidity. Based on the liquidity ratios, I would lend Tootsie Roll the $10 million short term note III. Solvency Ratios • Debt to Total Assets Ratio Year Tootsie Roll Hershey 2011 22% 80% The industry average is 57% 2010 22% 78% 2009 22% 79% 2008 22% 90% 2007 21% 85% Tootsie Roll has been consistent within the last couple years. Compared to Hershey, Tootsie Roll has great solvency. Tootsie Roll should not have a problem with......

Words: 598 - Pages: 3

A Comparative Anlysis of Hershey Company and Tootsie Roll Industries

...Liquidity Ratios: 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 compared to Hershey’s $0.92:1 Current cash debt coverage is considered a better representation of the ability of a business to meet its immediate obligations on the average day. The text explains if below 0.40 more investigation in the company’s liquidity should be done. Both Tootsie Roll and Hershey are above 0.40; however Tootsie Roll still shows a higher ability to meet their immediate obligations. Inventory turnover ratio shows how quickly the company sells its products. Although a high inventory ratio means the company is tying up little funds in inventory, it also means they could be losing out on sales opportunities due to inventory shortages. In this case Hershey sells their product faster, but they may be losing out on sales......

Words: 794 - Pages: 4

Tootsie Roll

...Tootsie Roll Charles M Mobley University of Phoenix Tootsie Roll Tootsie Roll Industries is a world leading candy company. The company began during 1896 in New York City ("Company Information," 2011). Leo Hirshfield began crafting the confections at his local shop. The delicious candy sold for one penny. The Tootsie Roll launched Hirshfield’s modest shop into a multinational corporation. The company headquartered in Chicago produces 62 million Tootsie Roll candies daily ("Company Information," 2011). The company has grown to include some of the world’s favorite candies. Tootsie Brand candies include the Tootsie Pop, Charms Blow Pop, Sugar Daddy, Dubble Bubble, and Junior Mints. The company has 22 candy brands ("Company Information," 2011). Tootsie Roll has annual sales of nearly 500 million dollars ("Company Information," 2011). The company is one of the leading candy producers in the world. Tootsie Roll Industries believes a family culture and progressive management will produce a leading company within the candy industry. Forbes Magazine has recognized the company as one of “Americas 200 Best Small Companies.” Business Ethics Magazine calls Tootsie Roll Industries on of the “100 Best Corporate Citizens” ("Company Information," 2011). The company’s commitment to ethics and integrity carries over into communities and national interests. Tootsie Rolls’ are a part of the U.S. militaries rations. Tootsie Roll Industries product sales in 2007 were 493......

Words: 535 - Pages: 3

Tootsie Roll

...Proceeds and Affects from the Loan The Tootsie Roll Industries, Inc. has chosen to allocate the funds from the loan to critical departments that will contribute to the growth of the company. The loan will permit Tootsie Roll to acquire new updated equipment for better production such as robotics to increase productivity. The allocation of these funds will open up research, and development, to produce healthier and cheaper ingredients for products. However, acquiring new robotic production machines or equipment will require a decrease in manpower, wages, and salaries. Approval of the loan will positively affect Tootsie Roll by the way products are manufactured and distributed. The loan acquisition will increase the productivity of the company because of the acquisition of new assets to benefit production. Through the downturn in the economy, Tootsie Roll Industries, Inc. has adjusted product prices or package weights to offset the higher costs (Kimmel, Weygandt, & Kieso, 2011).  During the first quarter of 2009, the Tootsie Roll Industries, Inc. adopted the authoritative guidance for disclosures about hedging activities derivative instruments. It requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of derivative instruments, and related gains and losses (Kimmel, Weygandt, & Kieso, 2011). It also required disclosures about related credit-risk features in derivative agreements (Kimmel...

Words: 302 - Pages: 2

Tootsie Roll V. Hershey

...Tootsie Roll Industries began in a small candy store in New York in 1896. Tootsie Roll is now headquartered in Chicago with operations throughout North America and with distribution channels in over 75 countries. Tootsie Roll has 2,200 full-time employees. Tootsie Roll sells the following branded candy: Tootsie Roll, Tootsie Roll Pop, Charms Blow Pop, Mason Dots, Andes, Sugar Daddy, Charleston Chew, Double Bubble, Razzles, Caramel Apple Pop, and Junior Mints. Tootsie Roll had 2007 net product sales of $493 million. Hershey Company was founded by Milton S. Hershey in 1893. Hershey is headquartered in Hershey, Pennsylvania and has 11,300 full-time employees. Hershey is famous for the Hershey Bar, Hershey's Kisses, Hershey's Bliss, Reese's, Twizzlers, Almond Joy, Kit Kat, and Ice Breakers. Hershey had net product sales of $4.9 billion for 2007. Part 1 of the project: Tootsie Hersheys Interpretation and Comparison between the two companies' ratios (Reading the Appendix of Chapter 13 will help you) Earnings per share As given in the income statement $0.94 $0.96 Comparing these numbers is not meaningful since the number of shares outstanding differs. Current ratio Current assets $199,726 = 3.45 $1,426,574 = 0.88 Tootsie Roll has $3.45 in current assets for every $1 dollar in current liabilities while Hershey only has 88 cents. Tootsie Roll has much greater liquidity based on this ratio. Current liabilities $57,972 $1,618,770 ...

Words: 1414 - Pages: 6

Tootsie Roll

...426,574 = 0.88 Tootsie Roll has $3.45 in current assets for every $1 dollar in current liabilities while Hershey only has 88 cents. Tootsie Roll has much greater liquidity based on this ratio. Current liabilities $57,972 $1,618,770 Gross Profit Ratio Gross profit $165,047 = 33.5% $1,631,569 = 33.0% Only product sales were used for the Tootsie Roll calculation since Hershey does not have rental and royalty revenue. This ratio indicates that Tootsie Roll has a slight edge for this profitability ratio because of its ability to maintain an adequate selling price above its cost of goods sold. Net Sales $492,742 $4,946,716 Profit margin ratio Net Income $51,625 = 10.4% $214,154 = 4.3% Total revenue was used for the base in Tootsie Roll's profit margin calculation because they also have rental and royalty revenue. Tootsie Roll earns over 10 cents for every $1 dollar in sales whereas Hershey earns over 4 cents so the advantage goes to Tootsie Roll for this profitabiility ratio. Net Sales $497,717 $4,946,716 Inventory Turnover Cost of Goods Sold $327,695 5.4 $3,315,147 5.3 Tootsie Roll has a slight edge in this liquidity measure because they are selling their inventory faster than Hershey. Average Inventory $60,680 times $624,503 times Days in Inventory 365 days 365 = 68 365 = 69 This ratio measures the average number of days inventory is held. Since Tootsie Roll has the......

Words: 1112 - Pages: 5

Tootsie Roll

...Explain the company plans for using the loan and how a loan approval will impact the company; conclusion of the business plan Tootsie Roll Industries has a future plan to expand the company and increase production, in order to do this the company will need to obtain a loan that will allow the company the financial support to add a new building to their current location. The company has opted to expand to another building that will offer already upgraded machinery that will allow an increase in productivity and new product. The positive effects of being approved for a loan, the company will purchase the new building within a short period of obtaining the funds from the loan. The building is better location that is a great benefit the majority of the company's suppliers for shipping and receiving. The loan will allow the company to purchase new equipment as needed for upgrades to continue the growth of productivity. The approval of the loan will allow the company to continue to increase productivity by allowing the company to have a greater deal of manufactured goods and styles of manufacturing can be altered when needed. The company will be able to purchase new robotics that will replace employee labor, that will allow for a decrease in employee wages. The company will be able to add new and improved technology that can be upgraded regularly and improved with allocated funds. The loan will also allow the company to add new web-based marketing programs, 99% of the......

Words: 520 - Pages: 3

Temporada 13 | A Christmas Prince... | Hombres de Elite