Tootsie Roll Industry, Inc.: Loan Package
Tootsie Roll Industry, Inc.: Loan Package
The ability to read and understand the information contained in a financial statement gives a better understanding about the financial health of the company, if the company is a good investment, if the company should request loans and under what terms. When evaluating the financial statement ratios of the Tootsie Roll Industries, the information will evaluate why the company needs a loan, and in what ways the loan will affect the company.
Liquidity Ratio Analysis
The current ratio for Tootsie Roll Industries is 3.78 (211,878/56,066). The company has a current ratio above 1, meaning it has enough current assets to cover its liabilities. The companies working capital figure would be (211,878-56,066), equating to 155,812.
Solvency Ratio Analysis
A look at Tootsie Roll’s long-term viability is necessary to gain confidence in becoming a creditor. Solvency Ratios “measure the ability of the company to survive over a long period of time” (Kimmel, Weygandt, Kieso, 2011, pg. 54). The Debt to Total Assets Ratio measures how much, as a percentage, of the financing provided by creditors instead of those that own the business. As of 2009, here is this measurement for Tootsie Roll:
Debt to Total Assets Ratio= Total liabilities/Total assets$185,762,000/$838,247,000=22.16%
This means only 22% of their total financing is from creditors. A second way to gain insight into the solvency of the company is to look at the Cash Debt Coverage Ratio. This analysis looks at what percentage of debt that is covered by one year of operation. In 2009, Tootsie roll has the following cash debt coverage ratio:
Cash Debt Coverage Ratio=Cash provided by operation/Average total liabilities
$62,079,000/185,762,000=33.42%
This means almost 34% of the company’s total outstanding debt to creditors is covered by a year of operational income. “In general, a value below...