These notes were issued in October of 1999. A firm’s capitol structure can be defined by what percent current liabilities and current equity hold in the company. Hershey Food Corporation currently holds 69% debt and 31% equity. (www.smithbarney.com) This would indicate a relatively high risk when considering investing in this company. I say this because when paying dividends on common stock there is no guarantee that they will be paid. When a company is in trouble or being sold it is obligated to repay creditors before paying dividends. (Ricci,1999) The amount of debt that Hershey Foods holds surprises me because of the low beta that it has. A company’s PE ratio can be determined by dividing price per share by earnings per share. A high PE ratio means that demand could be high, which could really draw people to invest in it. A low PE ratio could also draw people to invest in it because it could be estimated to be under valued, and the price may go up. (Ricci, 1999) Hershey’s current PE ratio is 14.87. This means that investors would be willing to pay 14.87 per dollar of current earnings. Earnings per share or EPS can be found by dividing net income by number of shares outstanding. This quarter Hershey Food Corporation’s EPS is .78. During this quarter last year the EPS was .76. This indicates a growth in net income. Last quarter the firm’s earnings per share was .62. With its current EPS being .78 it can be determined that net income has increased significantly since last quarter. The problems with the new information system decreased sales and the problem is obviously being handled as representatives of Hershey Foods Corporation predicted would be in the SEC filings. This year’s total EPS is estimated to be 2.14. Next year’s estimated EPS is projected to be 2.49. This means that there is expected to be growth next year. There is a high probability that Hershey Food Corpor...
