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 company rely primarily on debit or stockholders’ equity to finance its assets? To consider this I will be looking at Balance sheet. Comparing the amount of debt versus the amount of stockholders’ equity to determine whether the company relies more on creditors or owner for it financing. This reports the company’s resource and claims to those resources. The two types of claims are liabilities and stockholders’ equity. Hershey Foods reports a balance sheet of assets of $3,797,531, liabilities of $2,708,229 and stockholders’ equity of $1,089,302. Tootsie Roll Industries reports a balance sheet of assets of $811,753, liabilities $241,574 and stockholders’ equity $570,179. Hershey Food relies more on creditors versus Tootsie Roll whom relies on its own financing.
How does the company’s earnings performance suggest performance? A high measure suggests improved performance and low measure suggests weak performance. Hershey Foods reports Earnings per share and earnings of $2.30 versus Tootsie Roll Industry earning of $1.23. Overall, Hershey Foods has a higher performance over Tootsie Roll Industry.
Can the company meet its near-term obligations?
To consider this I will be looking at current assets and current liabilities. Higher ratio suggests favorable liquidity. Hershey Foods current assets are $3,797,531 and current liabilities are $2,708,229 which Current ratio is 1.4:1. This ratio shows a favorable liquidity. As for Tootsie Roll the current assets are $811,753 and current liabilities are $241,574 this gives the current ratio of 3.4:1 suggest a favorable liquidity. In short Tootsie Roll Industries has a more favorable liquidity.
Can the company meet its long-term obligation?
To consider this I will look at total debt and total assets. By looking at this as a ratio lower value suggests favorable solvency. Hershey Foods Debt to total assets ratio is 74 % represents an unfavorable solvency. As for Tootsie Roll Industries ratio is 29.8% represents a favorable solvency. Overall, Tootsie Roll Industries has a more favorable solvency over Hershey Foods.
How much cash did the company generate to expand operation, pay off debts or distribute dividends? To consider this I looked at free cash flow which comes from cash provided by operation activities, cash spent, on fixed assets and cash dividends. The amount of free cash flow indicates greater potential to finance new investment and pay additional dividends. Hershey Foods free cash flow is $56,989, this is low and indicates low potential to finance new investment and pay additional dividends. As for Tootsie Roll Industries $54,837 is also low. Overall Hershey Foods has a higher amount of free cash flow.
Is the price of goods keeping pace with changes in the cost of inventory? To consider this we need Gross profit and net sales. The ratio suggests the average margin between selling price and inventory cost is increasing. Too high of a margin results in lost of sale. Hershey Foods gross profit is 20.4%, this percent is low which indicates a gain of sales. As for Tootsie Roll Industries the percent is 41.8% which indicates in a lost of sales. Overall, Hershey Foods has a lower lost of sales.
Is the company maintaining an adequate...