Tootsie Roll Industries, Inc. Loan Package
In week three, Learning Team E presents a loan package for public held company, Tootsie Roll Industries, Inc., in business for over 100 years. Tootsie Roll is a manufacturer of confectionery products. In addition to sales in the United States, Tootsie Roll’s profits grew in Mexico, Canada, Europe, Asia, South and Central America. This loan package consists of three sections: Financial Ratios, Corporate Strategy-2008 Project: Capital Expenditure, and Loan Approval’s Effect on Tootsie Roll Industry, Inc. Financials. Comments on Financial Ratios and Company Financial Position
Selected financial ratios were calculated and are summarized in the table below. | | |Tootsie Roll Industries, Inc. Financial Ratios | | | |Dollar amounts are in thousands except Earnings Per Share | |Selected Liquidity Ratios |2007 |2006 | |Current Ratio |3.45 |3.07 | |Working Capital |$141,754 |$128,706 | |Current Cash Debt Coverage Ratio |1.50 |0.63 | | | | | |Selected Solvency Ratios | | | |Debt To Total Assets Ratio |21.5% |20.3% | |Cash Debt Coverage Ratio |0.54 |0.31 | |Free Cash Flow |$57,755 |-$815 | | | | | |Selected Profitability Ratios | | | |Profit Margin Ratio |10.5% |13.3% | |Return On Assets Ratio |6.4% |8.2% | |Earnings Per Share |0.94 |1.18 | | | | |
When analyzing liquidity, assets in 2007 increased by $9 million (M) and liabilities dropped by $5M causing the current ratio to rise. Working capital only increased by $13M. Tootsie Roll’s current cash debt coverage more than doubled in 2007. This is good considering the drop in cash provided by operations seen in 2006. However, the company’s liquidity could be improved.
The solvency ratios show that in 2006, free cash flow was negative. This was due to capital expenditures more than...