Tootsie Roll Analysis
FINANCIAL INFORMATION AND RATIOS COMPARASION.
The Hershey Company and Tootsie Roll Industries are two main confectionery companies. Every year both Hershey and Tootsie compile their annual reports. These reports include a plethora of information in regards to assets, liabilities and stockholders’ equity, earnings, comprehensive earnings, retained earnings, cash flows, and so forth.
To compare Hershey and Tootsie Roll on financial level, let’s look at both companies Liquidity, Solvency and Profitability Ratios for year of 2007.
LIQUIDITY RATIOS measure the short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash. Short-term creditors such as bankers and suppliers are particularly interested …show more content…
As we know, low values of current ratio may indicate that a firm may have difficulty meeting current obligations, but not in this case. If inventory turns over much more rapidly than the accounts payable become due, then the current ratio will be less than 1 (The Hershey has inventory that can be immediately converted into cash). TOOTSIE ROLL’s ratio is 3.45. A number this high means that management has so much cash on hands, they may be doing a poor job of investing it. Tootsie’s inventory turnover ratio is higher than Hershey’s. This means that Tootsie sells its inventory faster than Hershey. Hershey has higher days in inventory index which means that Hershey is not selling its total inventory as quickly as Tootsie. It could be a sign that Hershey can become less profitable.
Tootsie’s RTR is 14.61 and this indicates that on average the company’s accounts receivables turned over 14.5 times during the year 2007. Hershey’s RTR is 9.80, this indicates that on average the company’s accounts receivables turned over 9.80 times during the year 2007. So we can see that Tootsie’s extension of credit and collection of accounts receivable is more efficient than
The Hershey Company and Tootsie Roll Industries are two main confectionery companies. Every year both Hershey and Tootsie compile their annual reports. These reports include a plethora of information in regards to assets, liabilities and stockholders’ equity, earnings, comprehensive earnings, retained earnings, cash flows, and so forth.
To compare Hershey and Tootsie Roll on financial level, let’s look at both companies Liquidity, Solvency and Profitability Ratios for year of 2007.
LIQUIDITY RATIOS measure the short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash. Short-term creditors such as bankers and suppliers are particularly interested …show more content…
As we know, low values of current ratio may indicate that a firm may have difficulty meeting current obligations, but not in this case. If inventory turns over much more rapidly than the accounts payable become due, then the current ratio will be less than 1 (The Hershey has inventory that can be immediately converted into cash). TOOTSIE ROLL’s ratio is 3.45. A number this high means that management has so much cash on hands, they may be doing a poor job of investing it. Tootsie’s inventory turnover ratio is higher than Hershey’s. This means that Tootsie sells its inventory faster than Hershey. Hershey has higher days in inventory index which means that Hershey is not selling its total inventory as quickly as Tootsie. It could be a sign that Hershey can become less profitable.
Tootsie’s RTR is 14.61 and this indicates that on average the company’s accounts receivables turned over 14.5 times during the year 2007. Hershey’s RTR is 9.80, this indicates that on average the company’s accounts receivables turned over 9.80 times during the year 2007. So we can see that Tootsie’s extension of credit and collection of accounts receivable is more efficient than