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 effectively manage its receivables and employs effective credit policies. The Company’s inventory ratios also indicate stable levels of inventory size and turnover. Despite the fact that Hershey appears to be shifting to reliance on short-term debt to fund current liquidity needs, the Company’s overall liquidity position appears to be stable.
As of 2008, the Company’s liquidity position had improved and is showing ratios above industry average. Hershey’s current ratio and cash debt coverage have improved since 2004. It’s accounts receivable management has remained consistent and inventory management has improved. Over time Hershey has increased it’s ability to meet current obligations and is out-performing competitors in this area.
Tootsie Roll Industries’ current ratio and debt coverage ratios fluctuated between 2002 and 2004, with an overall small decrease. The Company’s financial statements indicate a decrease in cash and investments, as well as an increase in accounts payable and accrued liabilities. Tootsie Roll also took out a bank loan in 2004 creating short and long-term debt that did not exist in 2003 and 2002. According to the annual report, this debt financed the Company’s largest acquisition to date,...