Financial Statement Analysis for Tootsie Roll and Hershey

The Hershey Company engages in the manufacture, marketing, distribution, and sale of various types of chocolate and confectionery, refreshment and snack products, and food and beverage enhancers in the United States and internationally. The Hershey Company sells its products through sales representatives and food brokers, primarily to wholesale distributors, chain grocery stores, mass merchandisers, chain drug stores, vending companies, wholesale clubs, convenience stores, dollar stores, concessionaires, department stores, and natural food stores. The company was founded in 1894 and is based in Hershey, Pennsylvania. The Hershey Company went public on the New York Stock Exchange (NYSE) in 1922 (http://finance.yahoo.com/q/pr?s=HSY).†¦show more content†¦I could not locate an industry average against which to compare both companies. 3) Accounts Receivable Turnover Ratio is â€Å"a measure of the liquidity of receivables, computed by dividing net credit sales by average net receivables† (Kimmel Weygandt, Kieso, 2007, p. 396). A high ratio indicates a tight credit policy. A low or declining ratio indicates a collection problem, part of which may be due to bad debts. Hershey declined from 11.25 in 2002 to 10.72 in 2003 and 10.85 in 2004, which is below the industry average of 11.8 for all three years. Tootsie declined from 15.57 in 2002 and 16.37 in 2003 to 14.32 in 2004; however still remains far above the industry average. Therefore, I make a conclusion that Tootsie Roll collects its accounts in a more timely fashion than Hershey does. 4) Average Collection Period is â€Å"the average amount of time that a receivable is outstanding, calculated by dividing 365 days by the receivables turnover ratio† (Kimmel Weygandt, Kieso, 2007, p. 396). It is used to assess the effectiveness of a company’s credit and collection policies. An increase in collection period may be an indication of a decline in financial health of customers. Hershey’s collection period increased 32.45 in 2002 to 34.05 in 2003 and then decreased to 33.64 days in 2004. Tootsie Roll increased from 23.44 in 2002 and 22.29 in 2003 to 25.48 days in 2004. I could not locate an industry average against which to compare both companies. 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