Question

Analyze Hershey The Hershey Company (HSY) is the largest producer of chocolate in North America under the Hershey’s and Reese’s brand names. The following balance sheet information is provided at the end of three recent years (in thousands):

Year 3	Year 2	Year 1
Current assets:
Cash	$296,967	$346,529	$374,854
Short-term investments	—	—	97,131
Accounts receivable	581,381	599,073	596,940
Inventories	745,678	750,970	801,036
Other current assets	192,752	152,026	377,086
Total current assets	$1,816,778	$1,848,598	$2,247,047
Current liabilities:
Accounts payable	$522,536	$474,266	$482,017
Other current liabilities	1,386,907	1,743,646	1,453,630
Total current liabilities	$1,909,443	$2,217,912	$1,935,647

Required:

a. Compute the working capital for the three years. Negative amounts should be indicated by a minus sign.

Year 1: $

Year 2: $

Year 3: $

b. Compute the current ratio for the three years. Round to one decimal place.

Year 1:

Year 2:

Year 3:

c. Compute the quick ratio for the three years. Round to one decimal place.

Year 1:

Year 2:

Year 3:

d. Interpret the short-term liquidity for the three years from (c).

Answer 1

ANSWER:

As per the given Question

		Year 3	Year 2	Year 1
a.	Working capital = Current assets - Current liabilities
	Current assets	1816778	1848598	2247047
	Current liabilities	1909443	2217912	1935647
	Working capital	-92665	-369314	311400
b.	Current ratio = Current assets/Current liabilities
	Current assets	1816778	1848598	2247047
	Current liabilities	1909443	2217912	1935647
	Current ratio	1.0	0.8	1.2
c.	Quick ratio = Quick assets/Current liabilities
	Quick assets	878348	945602	1068925
	Current liabilities	1909443	2217912	1935647
	Quick ratio	0.5	0.4	0.6

d. The short-term liquidity of Hershey's has declined from Year 1 to Year 2 and then again improved slightly in Year 3.

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