Tootsie Roll & Hershey
ProfArgeol
project_template_comparing_tootsie_roll__hershey_2.xlsxTitle Page
| Go to Doc Sharing for the detailed Course Project instructions and grading rubric. |
| Complete your Title page on this tab. |
| Please include your name, the course, the date, |
| your instructor's name, and the title for the Project. |
Profiles
| Complete one paragraph profiling each company's business including information such as a brief history, where they are located, number of employees, the products they sell, etc. Please reference any websites you used |
| used for the Profiles on the Bibliography tab. |
| Tootsie Roll Industries began in a small candy store in New York in 1896. Tootsie Roll is now headquartered in Chicago with operations throughout North America and with distribution channels in over 75 countries. According to Yahoo Finance, Tootsie Roll has 2,200 full-time employees. Tootsie Roll sells the following branded candy: Tootsie Roll, Tootsie Roll Pop, Charms Blow Pop, Mason Dots, Andes, Sugar Daddy, Charleston Chew, Double Bubble, Razzles, Caramel Apple Pop, and Junior Mints. Tootsie Roll had 2009 net product sales of $496 million. |
| Hershey Company was founded by Milton S. Hershey in 1893 and is headquartered in Hershey, Pennsylvania. According to Yahoo Finance, Hershey had 12,100 full-time employees. Hershey is famous for the Hershey Bar, Hershey's Kisses, Hershey's Bliss, Reese's, Twizzlers, Almond Joy, Kit Kat, and Ice Breakers. Hershey had net product sales of $5.3 billion for 2009. |
Ratios
| Use this Excel spreadsheet to compute ratios; show your computations for all ratios on this tab and also include your commentary. | |||||||
| The financial statements used to calculate these ratios are available in Appendix A and Appendix B of your textbook. | |||||||
| Tootsie | Hersheys | Interpretation and Comparison between the two companies' ratios (Reading the Appendix of Chapter 13 will help you prepare the commentary) | |||||
| The comparison of the ratios is an important part of the project. A good approach is to briefly explain what the ratio tells us. Indicate whether a higher or lower ratio is better. Then compare the 2 companies on this basis. Remember - each ratio below requires a comparison. | |||||||
| Earnings per share | As given in the income statement | $0.95 | Basic Common | $1.97 | |||
| Current ratio | Current assets | $211,878 | = | 3.78 | $1,385,434 | = | 1.52 |
| Current liabilities | $56,066 | $910,628 | |||||
| Gross Profit Ratio | Gross profit | $176,947 | = | 35.7% | $2,053,137 | = | 38.7% |
| Net Sales | $495,592 | $5,298,668 | |||||
| Profit margin ratio | Net Income | $53,475 | = | 10.8% | $435,994 | = | 8.2% |
| Net Sales | $495,592 | $5,298,668 | |||||
| Inventory Turnover | Cost of Goods Sold | $318,645 | 5.7 | $3,245,531 | 5.8 | ||
| Average Inventory | $55,986 | times | $556,121 | times | |||
| Days in Inventory | 365 days | 365 | = | 64 | 365 | = | 63 |
| Inventory turnover | 5.7 | days | 5.8 | days | |||
| Receivable Turnover Ratio | Net credit sales | $495,592 | = | 14.4 | $5,298,668 | = | 12.2 |
| Average Net Receivables | $34,363 | $432,772 | |||||
| Average Collection Period | 365 | 365 | = | 25.3 | 365 | = | 29.8 |
| Receivable Turnover Ratio | 14.4 | days | 12.2 | ||||
| Assets Turnover Ratio | Net Sales | $495,592 | = | 0.60 | $5,298,668 | = | 1.45 |
| Average Total Assets | $825,886 | $3,654,875 | |||||
| Return on Assets Ratio | Net Income | $53,475 | = | 6.5% | $435,994 | = | 11.9% |
| Average Total Assets | $825,886 | $3,654,875 | |||||
| Debt to Total Assets Ratio | Total Liabilities | $185,762 | = | 22.2% | $2,914,692 | = | 79.3% |
| Total Assets | $838,247 | $3,675,031 | |||||
| Times Interest Earned Ratio | Net Income + Int Expense + Tax Expense | $64,422 | = | 265.1 | 761,590 | = | 8.4 |
| Interest Expense | $243 | 90,459 | |||||
| Payout ratio | Cash dividend declared on common stock | $17,825 | = | 33.3% | $263,403 | = | 60.4% |
| Net income | $53,475 | $435,994 | |||||
| Return on Common Stockholders' Equity | Net income - Preferred stock dividend | 53,475 | = | 8.3% | $435,994 | = | 78.5% |
| Average common stockholders' equity | 643,627.50 | $555,142 | |||||
| Free cash flow | Cash provided by operations minus capital expenditures minus cash dividends paid | $36,625 | = | $36,625 | $676,022 | $ 676,022 | |
| = | |||||||
| Current cash debt coverage ratio | Cash provided by operations | $75,281 | = | 1.31 | $1,065,749 | = | 0.98 |
| Average current liabilities | $57,344 | $1,090,420 | |||||
| Cash debt coverage ratio | Cash provided by operations | $75,281 | = | 0.41 | $1,065,749 | = | 0.34 |
| Average total liabilities | $182,259 | $3,099,734 | |||||
| Price/Earnings ratio | Market price as of 12/31/2009 | $27.38 | = | 29 | $35.79 | = | 18 |
| EPS as of 12/31/2009 | $0.95 | $1.97 | |||||
Summary
| You all get the chance to play the role of financial analyst below. The Summary should be a comparison of each company's performance for each major category of ratios (Liquidity, Solvency, and Profitability) listed below. Focus on major differences as you compare each company's performance. A nice way to conclude is to state which company you feel is the better investment and why. |
| Liquidity: Tootsie Roll has the advantage for each of the liquidity ratios with the exception of the inventory turnover and days in inventory for which Hershey has a slight advantage. Tootsie Roll has a large advantage in liquidity as evidenced by the $3.78 in current assets they have for every in $1 in current liabilities while Hershey has only $1.52 in current assets for every dollar in current liabilities. Tootsie Roll also has a better current cash debt coverage ratio and the advantage for the receivables turnover and average collection period. |
| Solvency: Tootsie Roll has the advantage for each of the solvency ratios with the exception of free cash flow. Tootsie Roll can cover their interest expense 265 times with income before interest and taxes while Hershey can only cover their interest expense 8 times with their income before interest and taxes. Hershey has $676 million in free cash flow while Tootsie Roll has approximately $37 million in free cash flow. Free cash flow can be used to undertake acquisitions, pay additional dividends, pay down debt, or by back stock. |
| Profitability: Hershey has the advantage for each of the profitability ratios with the exception of the Price-Earnings and profit margin ratios. Hershey has a significant edge in asset turnover and return on common stockholders' equity. Hershey has $1.45 in sales for every dollar in assets while Tootsie Roll has 60 cents in sales for every dollar in assets. Hershey has a return on common stockholders' equity ratio of 78% compared to 8% for Tootsie Roll. Hershey also has a much larger payout ratio (60% to 33%). |
| Conclusion: Tootsie Roll is the safer investment when you examine the liquidity and solvency ratios; however, Hershey has the edge for two significant profitability ratios. These ratios are return on common stockholders' equity and the payout ratio. That said, since I believe in the importance of fiscal strength, I would invest in Tootsie Roll; however, if I was looking for more growth potential, I would invest in Hershey because of their stronger profitability ratios. |
Bibliography
| The Appendixes of your textbook and any information you use to profile the companies should be cited as a reference below. |
| Big Charts (2011). Retrieved September 4, 2011 from http://bigcharts.marketwatch.com/historical/default.asp?symb=hsy&closeDate=12%2F31%2F09&x=0&y=0 |
| Hershey's (2011). Retrieved September 4, 2011 from http://www.hersheys.com/pure-products.aspx |
| HSY Profile (2011). Retrieved September 4, 2011 from http://finance.yahoo.com/q/pr?s=HSY+Profile |
| Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Financial accounting: Tools for business decision making, 6th ed. Danvers, MA: John Wiley & Sons, Inc. |
| Tootsie Roll Industries (2011). Retrieved September 4, 2011 from http://www.tootsie.com/ |
| TR Profile (2011). Retrieved September 4, 2011 from http://finance.yahoo.com/q/pr?s=TR+Profile |
