WK3 Tootsie Roll Industries Loan Package Team B

Topics: Balance sheet, Financial statements, Asset Pages: 4 (574 words) Published: June 29, 2015


Tootsie Roll Industries, Inc. Loan Package
Patrick Bofrone, Tara McAlinden, Katura Salinas, Patricia Tyler, Zer Yang ACC/561
June 23, 2015
Dr. Larry Key
Tootsie Roll Industries, Inc. Loan Package
Financial Statement Analysis
Financial statements provide information regarding a company’s performance and financial position. A tool to assist with evaluating the information in Tootsie Roll Industries financial statements is ratio analysis. Several different liquidity, solvency, and profitability ratios will be explained in the following paragraphs. Liquidity Ratios

Liquidity ratios measure a company’s short-term ability to pay its maturing obligations and to meet any unforeseen needs for cash (Kimmel, Weygandt, & Kieso, 2011). Working capital, current ratio, and current cash debt coverage ratio are just a few ratios that will show how liquid Tootsie Roll is.

Working Capital (Current Assets – Current Liabilities). Working capital, while not technically a ratio, does indicate whether or not Tootsie Roll will be able to meet their liabilities. The company’s working capital increased from $129,967 on December 31, 2008, to $155,812 on December 31, 2009, (Kimmel et al., 2011). Should Tootsie Roll need to use their short-term assets to pay their short-term liabilities, $155,812 represents what would be the remaining amount.

Current Ratio (Current Assets / Current Liabilities). The current ratio shows the proportion of current assets to current liabilities and is a more reliable indicator of liquidity than working capital (Kimmel et al., 2011). For 2009, Tootsie Roll’s current ratio of 3.78:1 is a slight increase from their 2008 current ratio of 3.22:1. Tootsie Roll’s ratio of 3.78 means that for every $1 of debt, the company has $3.78 in assets, which means they should be able to pay off their current liabilities.

Current Cash Debt Coverage (Cash provided by Operations / Average Current Liabilities). The current cash debt coverage ratio measures...
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