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Analysis Of Hershey And Tootsie Rolls

972 words - 4 pages

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 ...view middle of the document...

66 in 2004. Comparing these results to the industry average shows that both companies turn over their inventory nearly the same amount of times except for the sharp jump in 2003 for Tootsie Roll. This could be due to them introducing a new candy that became very popular and thus causing the product to sell very quickly.
By computing solvency ratios, you can find out the ability of a company to pay their long-term obligations when they become due. Taking a company’s total debt and dividing it by its total assets will give you its Debt to Total Assets ratio. This measures the percentage of assets financed by creditors instead of stockholders so the higher the percentage the riskier the company is to finance to. Tootsie Roll maintained a very good standing throughout the 3 years compared to the industry average of 70%. Their percentage for 2004, 2003, and 2002 were 29%, 19%, and 18% respectively. Hershey’s Co. had much higher percentages that were very close to the industry average. In 2004 it was 71%, 64% in 2003 and 61% in 2002. Comparing the two companies show that Hershey’s Co. is the riskier company in the long run.
For profitability ratios I will look at both company’s Gross Profit rate, Profit Margin ratio and their Return on Equity ratio. The Gross Profit rate of a company shows its ability to maintain a good selling price above its costs. Hershey’s Co. started with a Gross Profit rate of 37.8% in 2002 and climbed steadily to 39.5% in 2004 to even out with the industry average. Tootsie Roll had percentages slightly higher than Hershey’s Co. and the industry average. In 2002 it was at 43.5%, dropped slightly to 43.3% in 2003 and dropped some more to 41.8% in 2004....

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