Purchase Solution

# Ratios analysis: Tootsie Roll Industries 2010-2012

Not what you're looking for?

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

Using "Tootsie Roll Industries" (http://www.tootsie.com/comp_financial.php)

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 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.

##### Solution Preview

2012 Annual report found on
http://www.tootsie.com/financial/fin_247.pdf

INTRODUCTION

I reviewed the annual report for Tootsie Roll Industries (TRI) from 2010 through 2012 and selected industry ratios as available on www.yahoo.com 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.

(1) PROFITABILITY

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.

GROSS PROFIT

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 provided by:
###### Education
• BSc, University of Virginia
• MSc, University of Virginia
• PhD, Georgia State University
###### Recent Feedback
• "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
• "Thank, this is more clear to me now."
• "Awesome job! "
• "ty"
• "Great Analysis, thank you so much"

##### Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

##### Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

##### Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.