Gross Profit Ratio

Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from net sales, higher the gross profit better it is. Gross profit ratio of Tootsie is 33.50% while the gross profit ratio of Hershey is 32.98%. Gross profit ratio of Tootsie is slightly better.

The net profit margin is indicative of management's ability to operate the business with sufficient success not only to recover from revenues of the period, the cost of merchandise or services, the expenses of operating the business (including depreciation) and the cost of the borrowed funds, but also to leave a margin of reasonable compensation to the owners for providing their capital at risk. The ratio of net profit (after interest and tax) to sales essentially expresses the cost price effectiveness of the operation. Profit margin of Tootsie is much better than Hershey as it has profit margin of 10.48% as compare to 4.33%.

The Inventory turnover ratio measures how quickly inventory is sold. It is a test of efficient inventory management. A considerable amount of Company's capital is tied up in the financing of inventory. The inventory to sales ratio measures how many times Company's inventory has been sold during the year. Iventory turnover ratio of 11.04 of Hershey is much better than the 5.40 of Tootsie.

The days in inventory shows how many days inventory in hand, so a low ratio is better than high ratio. As comparison of Toosie which has high ratio as compare to Hershey. It means Hershey has better inventory management.