# Hershey and Tootsie Roll

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Tootsie Roll
Tootsie Roll Industries The Hershey Company Interpretation and comparison between the two companies' ratios
Ratios (pg 735) Ratio
Receivable Turnover Ratio (Net Sales/(Average Accounts Receivable) \$497,717/ ((\$32,371+\$35,075)/ 2) = 14.76 \$4,946,716/((\$487,285+\$522,673)/ 2) = 9.80 This ratio compares net sales divided by the average accounts reciavable. Tootsie Roll has far less sales but has to extend less credit on average to collect the full amount owed. By placing purchases in accounts recievable a business is able to generate more sales but does so by offering in essence an interest free loan to the customer. The accounts recievable indicates that both businesses are able to collect on their debts quickly. Since Tootsie has a higher percentage recievable turnover ratio they often have a relatively higher amount of cash on hand for running the business.
Average Collection Period (365/Recievables turn over ratio) page 402 365/14.76 = 24.7 days 365/9.80 = 32.2 days The average collection period indicates that Tootsie Roll is able to convert an accounts reviable item into cash just under 8 days faster than Hershey Company. Tootsie has a greater likelihood of meeting its financial obligations since it is more likely to promptly recieve payment. One factor that may influence the interpretation of this result is the terms by which each business extends credit. For example if both companies extend credit under net 30 terms, Tootsie is more likely to receive prompt payment than Hershey. This calculation gives insight into the amount of days that are required to recieve payment, but it number is only as useful when compared with industry norms and the terms by which the company extends credit.
Assets Turnover Ratio (Net Sales/Average Total Assets) page 450 \$497,717/((\$812,725+\$791,639) / 2) = 0.62...

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