Financial Statement Analysis Project : Hershey Corp. & Tootsie Roll Industries - Term Paper Example

When deciding which company to choose to invest with, a full analysis of liquidity, solvency and profitability need to be determined. To start, it is important to evaluate company history and the management. Hershey’s was established in 1894. Since then milk chocolate has been manufactured in large quantities. Hershey’s appears to be a great investment because the company has strived and made it through the great depression. A company’s ability to make it through the great depression shows that a company has strong management and financial abilities.

These abilities and characteristics of a company are important to consider. Hershey’s bought out Reese’s in 1956 and opened up the door for many investors. Combining two companies made Hershey’s more appealing to investors. Today, Hershey’s brings in $4 billion dollars in sales and has proven to be a strong investment. Hershey’s is open to the global market and has manufacturing facilities around the world. Hershey’s also owns many if its own commercial cocoa rights. This type of history is important when looking to invest.

The history of a company can tell much about where a company is going. When investing, company future is everything. A promising future will lead to a promising investment. What does Hershey’s have to offer numbers wise? Hershey’s currently has $1,426,574 in current assets. . When investing, it is important to oversee solvency ratios. These ratios let you know how a company is performing. The debt to total asset ratio is 3.87. The cash to debt ratio coverage is 0.22 and the free cash flow is $ 336,875.

These numbers indicate a decent debt to asset ratio. Profitability ratios are one of the most important set of numbers when looking over investment. The more profit and sales will likely indicate a better return. Hershey’s makes $1,631,569 for every $4,946,716 in sales. The profit margin for Hershey’s is somewhat low at only 0.04. The asset turnover rate is 1.18 with an ROA of 0.05. Earnings per share average at $0.60 with a payout ratio of 1.18. Hershey’s offers great earnings for the first two years and then the earning per share drops by more than half.

This makes Hershey’s more of a long term investment. Investors would need to buy and then hold onto the shares until prices per share increase. Hershey’s would not be a bad investment. The company has been around for a long time and seems to be strong financially. When choosing investments it is important to review another company in the same industry. Tootsie Roll is similar to Hershey’s. Tootsie Roll began in 1896. Tootsie Roll started out as a small candy shop in New York. Tootsie Roll produces more then 62 million Tootsie Rolls a day.

In 1931, Tootsie Roll sold the number one selling lollipop. This opened the door for Tootsie Roll and showed investors that Tootsie Roll was a profitable company that was always coming out with new products. New products are important for investors because new products increase sales. Annual sales for Tootsie Roll are projected at half a billion dollars. Tootsie Roll has been providing service and