Question

	Historical Ratios					Projected Ratios
	12/31/2014		12/31/2015			12/31/2016		12/31/2017		4/1/2018
Current Ratio	1.161		0.833		Current Ratio	0.951		0.964		0.613
Quick Ratio	0.522		0.426		Quick Ratio	0.46		0.466		0.294
Total Debt-to-Total-Assets Ratio	0.73		0.804		Debt-to-Total-Assets Ratio	0.85		0.832		0.865
Total Debt-to-Equity Ratio	2.82		4.306		Debt-to-Equity Ratio	5.976		4.962		6.525
Times-Interest-Earned Ratio	16.618		13.359		Times-Interest-Earned Ratio	14.376		15.802		16.776

Question: What do the ratios calculated communicate about the financial strengths and weaknesses of Hershey?

Question: Based on your calculations, would you invest in Hershey Company, why or why not?

Answer 1

1)

Current ratio is the measure of company's ability to pay its short term obligations. Current Ratio less than 1 means company will not be able to pay its short terms obligations with its current assets.

As it can be seen that current ratio of the company has continuously decreased to 0.613 in 2018 which shows that company will not be able to pay its short term obligations.

Also debt to total assets and the debt to equity of the company is increased significantly in 2018 which shows there is high financial risk for the company.

Time interest earned ratio is well above 10 which shows company will be able to pay its loan payments easily.

Thus lower current ratio and quick ratio and higher leverage are weaknesses for the company whereas times interest earned is positive for the company.

2)

Since current ratio and quick ratio of the company are very low, company may face liquidity problem in near future. Also higher Debt to asset and debt to equity shows that the firm is highly leveraged.

Therefore there is higher financial risk with the company and hence one should not invest in the company.