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Finance Summary

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Table of Contents

Liquidity 3

Current Ratio Results 3

Current Cash Debt Coverage Ratio 3

Accounts Receivable Turnover 3
Average Collection Period (Average Age of Receivables) 4

Inventory Turnover 4

Days in Inventory (Average Age of Inventory) 4

Overall Liquidity Evaluation 4

Solvency 4

Debt-to-Total Assets ratio 5

Times Interest Earned (Interest Coverage) ratio 5

Cash Debt Coverage Ratio 5

Free Cash Flow 5

Overall Solvency Evaluation 5

6
Profitability 6

Gross Profit Rate 6

Profit Margin Ratio 6

Return-on-Assets (ROA) 6

Asset Turnover 6

Return-on-Equity (ROE) 7

Earnings per Share 7

Price-Earnings (P/E) Ratio 7

Overall profitability evaluation: 7
Evaluation 8

Financial Analysis: Hershey Corp. & Tootsie Roll Industries

Financial Analysis: Hershey Corp. & Tootsie Roll Industries
Hershey and Tootsie Roll are both companies in the confection industry. We compared both companies for the years 2004, 2005, and 2006 against each other and against the industry averages in order to make a decision about which company we would choose to invest in. The comparisons we used to make our decision were ratios for liquidity, solvency, and profitability. As a result of our analyses, we have chosen the Hershey Company.

Liquidity

Liquidity ratios "measure short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash" (Kimmel Weygandt, & Kieso, 2007, p. 74). The higher the ratio value the larger the margin of safety that the company possesses to cover short-term debts. The liquidity ratios we used in analyzing both Hershey and Tootsie Roll are the current ratio, current cash debt coverage ratio, accounts receivable turnover ratio, average collection period (average age of receivables), inventory turnover, and days in inventory (average age of inventory).

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Current Ratio Results

Current ratio is "a measure used to evaluate a company's liquidity and...

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