A Comparative Anlysis of Hershey Company and Tootsie Roll Industries

Keeping Cost of Goods Sold at a minimum is just as vital as Marketing and Advertising. Maximum value for both customers and shareholders rely on the company’s operations being as lean as possible and its raw materials prices as low as possible. Tootsie Rolls Industries continually upgrades its plant assets to add capacity, improve quality, or increase efficiency. The company manages cost of raw materials through competitive bidding and using commodities futures

This means that for every dollar of liabilities, Tootsie Roll Company has $3.50 or $3.10 in current assets. In both instances, the current ratio is more than 1, so the company will have very little trouble with liquidity should the need arise.

Tootsie Roll Industries is a confectionery manufacturer headquartered in Chicago, Illinois. It operates seven production facilities – four in the United States, and a single one in Canada, Mexico, and Spain respectively. Its distribution channels span across 75 countries and approximately 92% of the sales are based in the United States.2 Be,yond of the namesake, Tootsie Roll Industries holds over 20 brands of candy. These confections include chocolates, lollipops, cotton candy, gum, and caramel. The non-chocolate products account for about 70% of the total company revenue. The major buyers of these products are confectionary wholesalers and grocery

Although debt to total assets has risen slightly, the amount of current liabilities has dropped by $4M and the cash debt coverage ratio has improved. This shows that Tootsie Roll can handle taking on a loan for $15M.

I have reviewed the past two years liabilities and stockholders’ equity sections of Tootsie Roll Industries, Inc. and compared the balance sheets using Debt to Equity Ratio and Times Interest Earned. The calculations presented in thousands:

Tootsie Roll faces a number of key issues concerning its strategy. One of such strategic issues relates to how it can maintain its marketplace success and sustain its competitive advantages, in light of (i) the company’s growth prospects in U.S. and foreign markets, (ii) intensity of the competition, and (iii) the fact that the two key leaders of the company are not getting any younger.

“Tootsie Roll’s good fortunes are an accumulation of many small decisions that were probably made right plus bigger key decisions, such as acquisitions, that have been made right, and a lot of luck.” Mel Gordon, CEO – Tootsie Roll, 1993

Overall regards to liquidity ratios, the higher the number the better; however, a too high also indicates that the firms were not using their resources to their full potential. Current ratio of 1.0 or greater shows that a company can pay its current liabilities with its current assets. JWN’s ratio increased from 2.06 in 2007 to 2.57 in 2010, and slightly decreased to 2.16 in 2011. JWN’s cash ratio increased significantly from 22% in 2007 to 80% in 2010. JWN has a cash ratio of 73% in 2011, which is useful to creditors when deciding how much debt they would be willing to extend to JWN. In addition, JWN also has moderate CFO ratio of 46%, indicating the companies’ ability to pay off their short term liabilities with their operating cash

Stocks between both Hershey Company and Tootsie Roll Industries are similar in nature; however, due to the vast line of products available between the two companies; Hershey comes out ahead with more products to their line. According to current stock numbers, though Tootsie Roll went public in 1922, Hershey, that went public in 1927, has remained the leader. As far as the lowest and highest stock prices have gone in the past 52 weeks, Tootsie Roll's lowest share price was $58.67; while Hershey's lowest share price came in at $29.25. Conversely, Tootsie Roll's highest stock price topped out at $31.96, while Hershey peaked at $65.19 a share.

The leverage ratios allow for us to better compare Krispy Kreme Doughnut’s performance versus other competitors and through time. Organization’s capital structure is dependent on its industry. Therefore in comparing debt ratios, we must compare to industry averages. Krispy Kreme

When comparing the debt-to-assets ratio of McDonalds and Wendys, you have to divide the firms total liabilities by their total assets. Essentially, the debt-to-assets ratio is the primary indicator of the firms debt management. As the ratio increases or decreases, it indicates the firms changing reliance on borrowed resources. The lower the ratio the more efficient the firm will be able to

Additionally, the current ratio, the debt ratio, and the debt equity were also computed. The current ratio lets investors know Sprouts ability to pay short-term debt (Gibson, 2013). The ratio results for 2015 was 1.50 times, 2014 was 1.51 times and 2013 was 1.32 times. While the current strived for current ratio is 2.0 times many do meet this standard and Sprouts stability could be attributed to their ability to control the receivables and/or inventory (Gibson, 2013). Meanwhile, the debt ratio tells investors Sprouts ability to pay long-term debt and takes into account the total liabilities and the total assets (Gibson, 2013). In addition it tells creditors, in this case, how well they are or not protected in the event Sprouts is becomes insolvent, thus a lower percentage is desired.

The debt-to-assets ratio indicates the percentage of assets financed by debt as a sign of the company’s financing threat. This analysis shows that the company has increased its debt financing from 27.2% in 2009 to 29.4% in 2010. Analysts probably would decrease their estimates of Radio Shack’s ability to repay lenders because the company increased its relative reliance on debt financing, thus causing Radio Shack to be more

Let’s look at the balance sheet for Tootsie Roll in more detail. First, the assets on a balance sheet are listed by how easy it is for the asset to be converted into cash. The easiest asset to convert to cash is listed first and the hardest to convert is listed last. The ease which an asset can be converted to cash is called liquidity.

While assessing Current Ratio I found that Pepsi Co has had a decrease in Current Ratio from 1.44 in 2009 to 1.11 in 2010 and .96 in 2011. What this means is that in 2011 Pepsi Co would not be able to pay back short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). As for 2010 and 2009 Pepsi Co would be able to pay back short-term liabilities because the ratio is over 1.0. The Current Ratio gives a sense of the efficiency of a company’s operating cycle or its ability to turn their products into cash to pay liabilities.