Question: Exhibit contains the income statements and balance sheets of The Hershey Company, manufacturer of such well-known products as Hersheys chocolate bars, Reeses peanut butter cups,

Exhibit contains the income statements and balance sheets of The Hershey Company, manufacturer of such well-known products as Hershey’s chocolate bars, Reese’s peanut butter cups, Almond Joy candy bars, and York peppermint patties.

1. Compute the following ratios for 2011:

(a) Current,

(b) Average collection period,

(c) Inventory turnover. Assume all sales are on credit.

2. Assess Hershey’s liquidity compared with the following averages for the food processing industry as provided by Reuters and with ratios computed for Tootsie Roll, a competitor in the candy manufacturing, marketing, sales, and distribution industry. Reuters provides the following overview of the food processing industry. The industry consists of “companies engaged in processing and packaging produce, meats, fish, animal feeds, fruit juices and dairy products. The industry includes, grain milling, crop cleaning, grading and packaging, animal slaughtering and packaging operations, seafood processing, freezing, canning operations, juice, coffee, tea, dairy and all other food manufacturers, including petfoods.”

Exhibit contains the income statements and balance sheets of The

Reuters Averages (as of August 31, 2012) 1.38 times Tootsie Roll (year ended December 31, 2011) 3.64 times Current ratio Average collection period Inventory turnover 19.1 days* 27.4 days 5.89 times 5.69 times

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1 a Current ratio 2046558 1173775 174 times b Average collection period 365 6080788 399499 390061 2 237 days c Inventory turnover 3548896 648953 533622 2 60 times For comparison Hersheys ratios for 20... View full answer

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