Broadening Your Perspective 2-2 The financial statements of The Hershey Company
ID: 2482372 • Letter: B
Question
Broadening Your Perspective 2-2
The financial statements of The Hershey Company and Tootsie Roll are presented below. Assume Hershey’s average number of shares outstanding was 220,688,000, and Tootsie Roll’s was 57,892,000.
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Cash Flows (in thousands)
Impairment of equity method investment
Loss from equity method investment
Amortization of marketable security premiums
Changes in operating assets and liabilities:
Accounts receivable
Other receivables
Inventories
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Income taxes payable and deferred
Postretirement health care and life insurance benefits
Deferred compensation and other liabilities
Others
Capital expenditures
Net purchase of trading securities
Purchase of available for sale securities
Sale and maturity of available for sale securities
Net cash used in investing activities
Shares repurchased and retired
Dividends paid in cash
Net cash used in financing activities
Income taxes paid
Interest paid
Stock dividend issued
For each company calculate the following values for 2011. (Hint: When calculating free cash flow, do not consider business acquisitions to be part of capital expenditures.) (Round all ratios to 1 decimal places, e.g. 15.2:1 or 15.2%, earnings per share to 2 decimal places, e.g. 15.21 and all other answers to thousands. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
(1) Working capital.
(2) Current ratio.
(3) Debt to assets ratio.
(4) Free cash flow.
(5) Earnings per share.
CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31, 2011 2010 2009 In thousands of dollars except per share amounts Net Sales $6,080,788 $5,671,009 $5,298,668 Costs and Expenses: Cost of sales 3,548,896 3,255,801 3,245,531 Selling, marketing and administrative 1,477,750 1,426,477 1,208,672 Business realignment and impairment (credits) charges, net (886 ) 83,433 82,875 Total costs and expenses 5,025,760 4,765,711 4,537,078 Income before Interest and Income Taxes 1,055,028 905,298 761,590 Interest expense, net 92,183 96,434 90,459 Income before Income Taxes 962,845 808,864 671,131 Provision for income taxes 333,883 299,065 235,137 Net Income $628,962 $509,799 $435,994 Net Income Per Share—Basic—Class B Common Stock $2.58 $2.08 $1.77 Net Income Per Share—Diluted—Class B Common Stock $2.56 $2.07 $1.77 Net Income Per Share—Basic—Common Stock $2.85 $2.29 $1.97 Net Income Per Share—Diluted—Common Stock $2.74 $2.21 $1.90 Cash Dividends Paid Per Share: Common Stock $1.3800 $1.2800 $1.1900 Class B Common Stock 1.2500 1.1600 1.0712 The notes to consolidated financial statements are an integral part of these statements and are included in the Hershey's 2011 Annual Report, available at www.thehersheycompany.com.
Explanation / Answer
1) Working capital = Current assets - current liabilities Hersheys company Current assets $2,046,558 Current liabilities $1,173,775 Working capital $ 872,783 Toosie Roll Current assets $ 212,201 Current liabilities $ 58,355 Working capital $ 153,846 2) Current ratio = Current assets / Current liabilites Hersheys company Current assets $2,046,558 Current liabilities $1,173,775 Current ratio 1.74 Toosie Roll Current assets $ 212,201 Current liabilities $ 58,355 Current ratio 3.64 3) Debts to assets ratio = Total Liabilities / Total Assets Hersheys company Total Liabilites $3,539,551 Total Assets $4,412,199 Debts to Assets ratio 80.22% Total Liabilites $ 191,921 Total Assets $ 857,856 Debts to Assets ratio 22.37% 4) Free cash flow Hersheys company $ (47,177) Toosie Roll $ 15,632 5) Earning per share = Net income / Total average outstanding Hersheys company Net income $ 628,962 Total average outstanding 220,688,000 EPS $ 2.8500 Net income $ 43,938 Total average outstanding 57,892,000 $ 0.6100
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