Go to Doc Sharing for the detailed Course Project

instructions and grading rubric.

Complete your Title page on this tab.

Please include your name, the course, the date,
your instructor's name, and the title for the project.

Complete one paragraph profiling each company's business including

information, such as a brief history, where they are located, number of
employees, the products they sell, etc. Please reference any websites you
used for the Profiles on the Bibliography tab.

Tootsie Roll Industries began in a small candy store in New York in 1896.
Tootsie Roll is now headquartered in Chicago with operations throughout
North America and with distribution channels in over 75 countries. According
to Yahoo Finance, Tootsie Roll has 2,200 full-time employees. Tootsie Roll
sells the following branded candy: Tootsie Roll, Tootsie Roll Pop, Charms
Blow Pop, Mason Dots, Andes, Sugar Daddy, Charleston Chew, Double
Bubble, Razzles, Caramel Apple Pop, and Junior Mints. Tootsie Roll had 2012
net product sales of $549.9 million.

Hershey Company was founded by Milton S. Hershey in 1893 and is

headquartered in Hershey, Pennsylvania. According to Yahoo Finance,
Hershey had 12,100 full-time employees. Hershey is famous for the Hershey
Bar, Hershey's Kisses, Hershey's Bliss, Reese's, Twizzlers, Almond Joy, Kit
Kat, and Ice Breakers. Hershey had net product sales of $6.6 billion for 2012.

Use this Excel spreadsheet to compute ratios; show your computations for all ratios on this tab and also include your commentary.

The financial statements used to calculate these ratios are available in Appendix A and Appendix B of your textbook.
Interpretation and comparison between the two companies' ratios (reading
the Appendix of Chapter 13 will help you prepare the commentary).
Tootsie Roll

Hershey's
The comparison of the ratios is an important part of the project. A good approach is to briefly explain
what the ratio tells us. Indicate whether a higher or lower ratio is better. Then compare the two
companies on this basis. Remembereach ratio below requires a comparison.

Earnings per Share of Common Stock (basic - common)

Current Ratio

As given in the income statement

0.89

3.01

Current assets
Current liabilities

$197,241
$60,765

3.25

$2,113,485
$1,471,110

1.44

Gross Profit Margin

Gross profit
Net Sales

$183,321
$549,870

33.3%

$2,859,882
$6,644,252

43.0%

Rate of Return (Net Profit Margin) on Sales

Net Income
Net Sales

$52,004
$549,870

9.5%

$660,931
$6,644,252

9.9%

Inventory Turnover

Cost of Goods Sold

Average Inventory

$365,573
$67,072

5.5
times

$3,784,370
$641,108

Days' inventory outstanding (DIO)

365 days
Inventory turnover

365
5.5

67
days

365
5.9

62
days

Accounts Receivable Turnover

Net credit sales

Average Net Accounts Receivable

$549,870
$42,002

13.1

$6,644,252
$430,441

15.4

Days' sales outstanding (DSO)

365
Receivable Turnover Ratio

365
13.1

27.9
days

365
15.4

23.6
days

Net Sales
Average Total Assets

$549,870
$852,297

0.65

$6,644,252
$4,580,967

1.45

Rate of return on sales times Asset Turnover

$52,004
$852,297

6.1%

$660,931
$4,580,967

14.4%

Total Liabilities
Total Assets

$196,922
$846,737

23.3%

$3,706,466
$4,412,199

84.0%

Net Income + Int Expense + Tax Expense

Interest Expense

$74,301
$137

542.3

1,111,148
95,569

11.6

Dividend per share of common stock (Yahoo Finance 11/1/2013)

Market price per share of common stock (Yahoo Finance 11/1/2013)

$0.32
$31.72

1.0%

$1.94
$98.85

2.0%

Net income - Preferred dividends

Average common stockholders' equity

$52,431
$657,875

8.0%

$660,931
$964,658

68.5%

Asset turnover

Rate of Return on Total Assets (ROA)

Debt Ratio

Times-Interest-Earned Ratio

Dividend Yield

Rate of Return on Common Stockholders' Equity (ROE)

Free cash flow

Price/Earnings Ratio (Multiple)

(please see the instructions for the dates to use for this ratio)

Net cash provided by operating activities minus cash payments earmarked

for investments in plant assets

12/31/2012
EPS as of 12/31/2012

$93,033

$25.92
$0.89

$93,033

29

5.9
times

$836,100

836,100

$72.22
$3.01

24

You all get the chance to play the role of financial analyst below. The summary should be a
comparison of each company's performance for each major category of ratios (liquidity,
solvency, and profitability) listed below. Focus on major differences as you compare each
company's performance. A nice way to conclude is to state which company you feel is the
better investment and why.
Measuring Ability to Pay Current Liabilities: Tootsie Roll has the advantage for the current ratio. Tootsie Roll has
$3.25 in current assets for every dollar in current liabilities while Hershey has only $1.44 in current assets for
every dollar in current liabilities.
Measuring Turnover: Hershey has the advantage for the inventory turnover and accounts receivable turnover
ratios. Hershey turns over their inventory 5.9 times to Tootsie Roll's 5.5 times and Hershey turns over their
accounts receivable 15.4 times to Tootsie Roll's 13.1 times.
Measuring Leverage- Overall Ability to Pay Debts: Tootsie Roll has significantly less debt than Hershey as
evidenced by Tootsie Roll's 23% debt to asset ratio as compared to Hershey's 84% debt to asset ratio. Tootsie
Roll can cover their interest expense 504 times with income before interest and taxes while Hershey can only
cover their interest expense 11 times with their income before interest and taxes. Tootsie Roll has the advantage
for each of these ratios.
Measuring Profitability: Hershey has the advantage for each of the profitability ratios. Hershey has a significant
edge in return on common stockholders' equity with a 68.5% return on common stockholders' equity as
compared to Tootsie Roll's 8.0% return on common stockholders' equity. Hershey also has a higher gross profit
rate (43.0% to 33.3%) and higher profit margin ratio (9.9% to 9.5%).
Analyzing Stock as an Investment: Hershey returns a 2% dividend yield to their investors while Tootsie Roll's
yield is 1%. Hershey has positive free cash flow of $836.1 million while Tootsie Roll has positive free cash flow of
$93 million. Free cash flow can be used to undertake acquisitions, pay additional dividends, pay down debt, or
buy back stock.
Conclusion: Tootsie Roll is the safer investment when you examine their ability to pay current liabilities and
overall liabilities; however, Hershey has the edge for all of the profitability ratios. For the conservative investor,
Tootsie Roll looks like the way to go because of their strong current and times-interest-earned ratios. For the
growth-oriented investor, Hershey is the way to go because of their stronger profitability ratios and large amount
of free cash flow.

The Appendices of your textbook and any information you use to profile the companies should be cited as a reference

Big Charts for Hershey (2013). Retrieved October 29, 2013 from http://bigcharts.marketwatch.com/historical/default.asp?
symb=HSY&closeDate=12%2F31%2F2012&x=0&y=0
Big Charts for Tootsie Roll (2013). Retrieved October 29, 2013 from http://bigcharts.marketwatch.com/historical/default.asp?
symb=TR&closeDate=12%2F31%2F12&x=12&y=19

Harrison, W.T., Horngrenm C.T. & Thomas, C.W. (2013). Financial Accounting, 9th ed. Upper Saddle River, NJ: Pearson Educa
Hershey's 2012 Annual Report (2013). Retrieved October 29, 2013 from
http://www.thehersheycompany.com/assets/pdfs/hersheycompany/TheHersheyCompany_10K_20130222.pdf
HSY Profile (2013). Retrieved October 31, 2013 from http://finance.yahoo.com/q/pr?s=HSY+Profile
HSY Stock Price (2013). Retrieved November 1, 2013 from http://finance.yahoo.com/q?s=hsy&ql=1
Tootsie Roll Industries 2012 Annual Report (2013). Retrieved October 29, 2013 from http://www.tootsie.com/financial/fin_247.pd
TR Profile (2013). Retrieved October 31, 2013 from http://finance.yahoo.com/q/pr?s=TR+Profile
TR Stock Price (2013). Retrieved November 1, 2013 from http://finance.yahoo.com/q?s=TR&ql=1