Problem 7-3A Making Business Decisions: Analyzing The Hershey Company's Accounts Receivable Turnover Ratio LO2 You are considering making a loan to The Hershey Company. The following information is from the financial statements included in Form 10-K for fiscal years 2014 and 2013 (in thousands of dollars): RATIO ANALYSIS BUSINESS DECISION MODEL REAL WORLD $7,421,768 7,146,079 Net sales for the year ended: December 31, 2014 December 31, 2013 Accounts receivable-trade, net: December 31, 2014 December 31, 2013 December 31, 2012 596,940 477,912 461,383 The following information is from the financial statements included in Form 10-K for fiscal years 2014 and 2013 for Tootsie Roll Industries, Inc. (in thousands of dollars): $539,895 539,627 Net product sales for the year ended: December 31, 2014 December 31, 2013 Accounts receivable trade, less allowances of $1,968, $2,042, and $2,142 respectively: December 31, 2014 December 31, 2013 December 31, 2012 43,253 40,721 42,108 Required Part A. The Ratio Analysis Model A lender must assess how well a company is managing its accounts receivable before making a loan. The accounts receivable turnover ratio tells us how many times in a year a company collects its receivables. Replicate the five steps in the Ratio Analysis Model to analyze the accounts receivable turnover ratios for The Hershey Company and Tootsie Roll Industries, Inc.: 1. Formulate the Question 2. Gather the Information from the Financial Statements 3. Calculate the Ratio 4. Compare the Ratio with Other Ratios 5. Interpret the Ratios Part B. The Business Decision Model A lender must consider a variety of factors, including financial ratios, before making a loan. Replicate the five steps in the Business Decision Model to decide whether to loan money to The Hershey Company: 1. Formulate the Question 2. Gather Information from the Financial Statements and Other Sources 3. Analyze the Information Gathered 4. Make the Decision 5. Monitor Your Decision Problem 7-3A Making Business Decisions: Analyzing The Hershey Company's Accounts Receivable Turnover Ratio LO2 You are considering making a loan to The Hershey Company. The following information is from the financial statements included in Form 10-K for fiscal years 2014 and 2013 (in thousands of dollars): RATIO ANALYSIS BUSINESS DECISION MODEL REAL WORLD $7,421,768 7,146,079 Net sales for the year ended: December 31, 2014 December 31, 2013 Accounts receivable-trade, net: December 31, 2014 December 31, 2013 December 31, 2012 596,940 477,912 461,383 The following information is from the financial statements included in Form 10-K for fiscal years 2014 and 2013 for Tootsie Roll Industries, Inc. (in thousands of dollars): $539,895 539,627 Net product sales for the year ended: December 31, 2014 December 31, 2013 Accounts receivable trade, less allowances of $1,968, $2,042, and $2,142 respectively: December 31, 2014 December 31, 2013 December 31, 2012 43,253 40,721 42,108 Required Part A. The Ratio Analysis Model A lender must assess how well a company is managing its accounts receivable before making a loan. The accounts receivable turnover ratio tells us how many times in a year a company collects its receivables. Replicate the five steps in the Ratio Analysis Model to analyze the accounts receivable turnover ratios for The Hershey Company and Tootsie Roll Industries, Inc.: 1. Formulate the Question 2. Gather the Information from the Financial Statements 3. Calculate the Ratio 4. Compare the Ratio with Other Ratios 5. Interpret the Ratios Part B. The Business Decision Model A lender must consider a variety of factors, including financial ratios, before making a loan. Replicate the five steps in the Business Decision Model to decide whether to loan money to The Hershey Company: 1. Formulate the Question 2. Gather Information from the Financial Statements and Other Sources 3. Analyze the Information Gathered 4. Make the Decision 5. Monitor Your Decision
