Financial Comparison

Introduction1

Hershey1

Nestle1

Analysis2

Current Ratio2

Earnings per Share3

Return on Equity3

Operating Margin4

Debt Equity Ratio4

Assets Turnover5

Conclusion5

References6

Financial Comparison

Introduction

Hershey

The Hershey Company is one of the largest chocolate producers in America. It is also a leading sugar and chocolate confectioner in the world. The major contributor to its income is its operations in North America. Its products are marketed in more than fifty countries with more than eighty brands. The company's famous products include Reese's, Hershey's, Ice Breaker and Hershey's kisses. It major competitors include Mondelez International, Mars and Nestle (Keidel, 2010).

This paper draws a financial comparison between Hershey and Nestle by using various financial ratios such as current ratio, earnings per share, return on equity, operating margin, debt equity ratio and assets turnover ratio. Therefore a brief introduction of Nestle has also been provided.

Nestle

It is one of the largest beverage and food Company that employs over 265,000 people worldwide. Nestle began almost 130 years ago and its success has been due to the product innovations and business acquisitions. With the passage of time, Nestle has expanded its product portfolio to include many types of confectionary items such as soups, coffees, chocolates, mineral water, frozen products and other food products (www.scribd.com). In 2012, it had sales on about 92 million CHF. The various categories of food and beverage of Nestle include mineral water, baby food, chocolates, cereals, Coffee, frozen food, drinks, ice cream, pet care, weight management and sports nutrition (www.nestle.com).

Analysis

Hershey

Hershey

Nestle

Nestle

Industry

2011-2012

2012-2012

2011-2011

2012-2012

2011

Current ratio

1.74

1.44

1.29

0.95

EPS

2.74

2.89

10.12

2.96

1.69

Return on Equity

71.83

70.1

61.8

15.99

10

Operating margin

17.4

16.7

14.8

14.9

11.0

Debt equity ratio

2.06

1.48

0.12

0.11

140.7

Assets turnover

1.4

1.45

0.99

0.74

Current Ratio

The current ratio of Hershey in Year 2011-12 was 1.74 and in the year 2012-12 was 1.44 (financials.morningstar.com). This shows that the current ratio of Hershey has reduced in year 2012. This reduction shows that the ability of Hershey's to pay off its short term obligations through current assets has reduced.

In comparison to its competitor Nestle, the current ratio of Hershey is better in both years. This differences in current ratio shows that Hershey in at a better position to pay off its short term debt as compared to Nestle.

Earnings per Share

The earnings per share of Hershey's have increased in Year 2012-12 as compared to 2011-12. This increase shows that the profit allocated to each common stock that is outstanding has increased. This increase in EPS is due to the increase in revenue of the company in 2012-12.

Nestle had an EPS of 10.12 in 2011-12 which declined significantly to 2.96 in 2012-12 (financials.morningstar.com). This decline in the EPS has been due to the drastic decline in the income of Nestle in Year 2012-12. Hershey has not performed as well as Nestle in both years in terms of earnings per share. On the other hand, when it is compared with the industry average, it has performed better than most of the companies in the industry (biz.yahoo.com).

Return on Equity

The return on equity has declined in 2012-12 as compared to 2011-12. Return on equity shows the amount of profit that is generated using the equity of shareholders. This decline shows that the amount of profit generated using the equity has ...