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Ratios analysis: Tootsie Roll Industries 2010-2012

Using the library and other course resources, find a manufacturing company's annual report.

Using "Tootsie Roll Industries" (

Calculate the following ratios for the company that you select:
Return on assets
Return on equity
Gross profit margin
Debt to equity ratio
Debt ratio
Current ratio
Quick ratio
Inventory turnover
Total asset turnover
Price earnings ratio

Using the calculated ratios, analyze the financial performance of the firm. You will do this by looking at the ratios and comparing them to ratios from previous periods and in some cases, against their competitors. Keep in mind that you are trying to determine how the firm is performing under each of the listed ratios. In a memo to the chief executive officer (CEO), include the following:

Explain the ratios that you calculated.
Address other methods of analyzing financial statements aside from ratio analysis.
Explain your analysis of the firm, and make recommendations for improvement.

Solution Preview

2012 Annual report found on


I reviewed the annual report for Tootsie Roll Industries (TRI) from 2010 through 2012 and selected industry ratios as available on to understand four major aspects of financial health:
(1) Profitability
(2) Liquidity
(3) Productivity
(4) Leverage

The four aspects are examined by ratios that each gives a unique view on the profits, liquidity, productivity and leverage used by TRI during this three-year period. The comments will highlight the strengths and weaknesses of TRI over time and as a participant in a competitive industry. Each ratio will be discussed individually and then the major aspects will be discussed as a collection of the related ratios.


Profitability measures all have something in common. They investigate how well the firm prices the product compared to costs to yield profits. These profit measures are computed as either a percent of sales, as a percent of assets or a percent of equity. All three views tell a slightly different story but they are related in that they are contrast profits against some item: sales, assets or equity. If profits are down, all these measures are down. In addition, if profits are up, all these measure rise with the improved profits. However, they do not all rise and fall in equal measures as they measure against different standards (sales, assets or equity).

I have included price/earnings ratio in this set. It is not a pure profitability measure. Instead, it measures the market's impression of future profit and cash flow generating ability. However, the measure does use earnings per share as the yard stick and thus is uses profits, rising and falling with profits as the other profit ratios.


Starting at the top of the income statement and moving down, we will begin with gross profit. This is a measure of how well the product was able to command a good market price and how well TRI controlled costs of the product. It is presented as a percent of sales. TRI's gross ...

Solution Summary

Your discussion is 1,326 words and a reference and discussions the profitability, liquidity, leverage and productivity of Tootsie Roll Industries. These are computed for 2010, 2011 and 2012. Industry comparisons from Yahoo! Finance are included as well as selected ratios from Nestle's 2012 annual report.