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 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 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 higher than industry average cash debt coverage ratio, Tootsie Roll at .412, and Hershey at .318. The average is .1956. Tootsie Roll has a higher free cash flow were it compromises 10.33% of its sales; Hershey is at 9.26%. with the average being 6%. Tootsie Roll creditors provide .30...
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