The financial statements of Hershey Foods are presented in Appendix B, following the financial statements for Tootsie Roll Industries in Appendix A.

Instructions

(a) Based on the information contained in these financial statements, compute the following 1998 ratios for each company:

(1) Current ratio.

(2) Acid-test ratio.

What conclusions concerning the companies’ liquidity can be drawn from these ratios?

(b) Based on the information contained in these financial statements, compute the following 1998 ratios for each company:
(1) Debt to total assets.
(2) Times interest earned.
What conclusions concerning the companies’ long-run solvency can be drawn from these ratios?
RESEARCH CASE