Fi504 Project

Memo

To: Kelly Damron

From: Rick Gordon

Date: August 23, 2010

Re: Comparative analysis between Tootsie and Hershey corporations.

Message:

In analyzing both Tootsie and Hershey Corporation I looked at the following categories, Liquidity, Profitability, and Solvency. Each company was analyzed using eighteen different ratios side by side. Both corporations are part of the confectioners industry so analysis was done to look at how each company compares to other corporations within their industry. All supporting data and documentation can be found within the file FI504_project_rgordon.xlsx.

Liquidity

Analyzing both companies for liquidity I found that Tootsie’s current ratio was much better than Hershey. Tootsie’s current ratio was at 3.78 compared to Hershey at 1.52. Tootsie is in a much better position to pay off short term debt than Hershey is. In looking at the current cash debt ratio Tootsie is better poised to handle their debt better than Hershey’s. Both companies fare well when it comes to their inventory, accounts receivable and turnover ratios. Regarding liquidity I think that Tootsie fares better than Hershey especially in regards to their current ratio and cash debt ratios.

Profitability

The ratios of profitability are of interest to future investors as well as creditors. Each company wants to excel in each of these categories to ensure that their company looks good for future investors and financiers. In looking at the profit margin ratio, Tootsie was at 10.79 compared to Hershey at 8.23. It seems that Tootsies operations run a bit more efficient than Hershey’s. Hershey’s however is better at using their current investment to generate profit. This is evident when looking at the return on assets ratio. I found that Hershey was at 11.92 compared to Tootsie with 6.47. Looking at the return on common shareholder’s equity I found that Hershey’s was high at .57 compared to Tootsie at .08. Hershey’s delivers a better return on...