Hershey Tootsie Roll Ratio
Hershey Tootsie Roll Ratio
After reviewing the data, I conclude that Tootsie is fiscally better than Hershey. Both have relatively close gross margins, however Tootsie has a higher net margin that suggest having greater efficiencies. Furthermore, Tootsie is more solvent with a lower debt to asset ratio, and it produces a higher return on assets (ROA) in comparison to Hershey. Therefore, it would be better to invest according to the data comparison for the year of 2007 in Tootsie Roll Corporation.
Liquidity Ratios –
Based on the liquidity ratios, Tootsie Roll seems to be more liquid than Hershey. If one looks at the current ratio of the 2007 year in comparison to Hershey, Tootsie Roll time and again have shown it is more liquid than Hershey. This proves that Tootsie can pay off short term debt more quickly than Hershey. For a company to be more liquidity can move that Tootsie can obtain credit faster than Hershey when short term funds are needed from creditors. In turn creditors are more comfortable in lending credit to Tootsie Roll, because creditors can see that the company can pay off short term debt. Another factor in regards to the ratios is Tootsies inventory. It seems that they keep a higher inventory and their turnover rate is faster compared to Hersheys. Tootsie overall, is more liquid than Hershey and to creditors a more liquid company is a positive when one is dealing with lending short-term creditor to a company.
Profitability Ratios-
For the profitability ratios for Hersheys vs. Tootsie, Hersheys had a higher gross profit rate for the years of 2005, 2006 and 2007. The difference between the sales and the production costs for Tootsie was higher for all three years for Tootsie. This means that the amount of contribution to the business enterprise, after paying for direct-fixed and direct variable unit costs, required covering overheads and providing a buffer for unknown items. The profit margin ratio or measurement to assess the profitability of both companies activities, excluding fixed costs shows that Tootsies results were higher than Herseys for all three years that I reviewed. The results for 2007 did show that the number of dollars earned derived from each dollar of assets they control or their return on assets was higher for Hersey. This gives an indication of the capital intensity of the company. The results also show that Hersey had a higher asset turnover ratio for all three years. The earnings returned on the initial investment amount or Earning per Share was higher for Tootsie than it was for Hershey. Overall, the price earnings or the price paid for a share relative to the annual net income or profit earned by firm per share was slightly higher for Hershey in 2005 but higher for Tootsie in 2007 and 2008.