Copy of Ratio Analysis - Part1 Ratios The Hershey Company...

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Part-1 Ratios Tootsie Roll Industries The Hershey Company Ratios Ratio Earning Per Share  0.95   0.94  Net Income  51,625,000   214,154,000  No. of Common Shares  54,296,000   227,049,851  Current Ratio  3.45   0.88  Current Assets  199,726,000   1,426,574,000  Current Liabilities  57,972,000   1,618,770,000  Gross Profit Rate(%)  33.50   32.98  Gross Profit  165,047,000   1,631,569,000  Net Sales  492,742,000   4,946,716,000  Profit Margin Ratio(%)  10.48   4.33  Net Profit  51,625,000   214,154,000  Net Sales  492,742,000   4,946,716,000 
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Inventory Turnover Ratio  5.40   11.04  Cost of Goods Sold  327,695,000   3,315,147,000  Average Inventory  60,679,500   300,416,910  Days in Inventory  68   33  Days in a year  365   365 
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two companies' ratios Interpretation and comparison between the Earnings per share is a measure of profitability of a firm from owners' poin of  view. The earnings per share is a good measure of profitability and when  compared with EPS of similar companies, it gives a view of the comparative  earnings or earnings power of the firm. EPS pf Tootsie Roll Industries of  $0.95 is slightly higher than the EPS of The Hershey Company that is $0.94. This ratio is a general and quick measure of liquidity of a firm. It represents  the margin of safety or cushion available to the creditors. The current ratio  measures the ability of the company to meet its short-term obligations and  reflect the short-term financial strength/solvency of the company.  it is  analyzed that "Tootsie" has much strong liquidity than "Hershey" as its  current ratio is 3.45 as compare to 0.88 of Hershey. It is important to note  that a very high ratio of current assets to current liabilities may be indicative  of slack management practices, as it might signal excessive inventories for  the current requirements and poor credit management in terms of  overextended accounts receivables. At the same time, the company may not  be making full use of its current borrowing capacity. Therefore a company  should have a reasonable current ratio. Gross profit ratio may be indicated to what extent the selling prices of goods  per unit may be reduced without incurring losses on operations. It reflects  efficiency with which a firm produces its products. As the gross profit is found  by deducting cost of goods sold from net sales, higher the gross profit better  it is.  Gross profit ratio of Tootsie is 33.50% while the gross profit ratio of  Hershey is 32.98%. Gross profit ratio of Tootsie is slightly better.  The net profit margin is indicative of management’s ability to operate the 
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This note was uploaded on 08/24/2011 for the course MM 522 taught by Professor Fisher during the Spring '08 term at Keller Graduate School of Management.

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Copy of Ratio Analysis - Part1 Ratios The Hershey Company...

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