Net Profit Margin:
Earnings Before Tax (EBT) – Taxes/Net Product Sales OR Net income/Sales Net Profit Margin is a ratio of profitability that measures how much out of every dollar of sales a company actually keeps in earnings. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. 43938/528369 = 8.32%
This is above industry average of 7.23%.
Tootsie Roll’s profit margin is 8.32%, meaning the company has a net income of $.0832 for each dollar of sales. Return on Assets:
Net Income/Total Assets
ROA is how much income is earned on each dollar invested. It will always be smallest compared to ROE & ROI. ROA is an indicator of how profitable a company is relative to its total assets, or how efficient management is at using its assets to generate earnings. 43938/857856 = 5.12%
This is below industry average of 8.15%.
Tootsie Roll’s ROA is 5.12% whereas the industry average is 8.15% meaning that Tootsie Roll needs to teach management how to make better choices to allocate its resources.
Return on Equity:
Net Income/Equity (total assets – total liabilities)
ROE is the amount of net income returned as a percentage of shareholders equity. It measures a company’s profitability by revealing how much profit a company generates with the money shareholders have invested. When compared to ROI (return on investment) ROE cannot be below ROI; however, they can be equal if no long term debt exists. If these ratios are apparently wide there is a significant amount of long term debt being used. 43938/857856 – 191921 = 43938/665935 = 6.60%
This is significantly low compared to the industry average of 19.33%. According to ROE Tootsie Roll is not effective with using money shareholders have invested. Current Ratio:
Current Assets/Current Liabilities
Current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations. The higher the current ratio, the more capable the company is of paying its obligations. A company under 1 suggests that it would be able to pay off its obligations if they came due at that point. On the other hand, a ratio of 1 could show that the company is not in good financially and needs to improve on how effective their operating cycle liquidates products. Liquidity can be affected by trouble collecting payment on receivables or having long inventory turnover. 212201/58355 = 3.64
This is above industry average of 1.38.
The rule of thumb for current ratio is 2, meaning a company wants to make twice as much liquid assets to current liabilities owed. Tootsie Roll compared to industry average is more capable of paying of their obligations. Quick Ratio:
Current Assets – Inventory/Current Liabilities
Quick ratio, or acid test, is an indicator of company’s short-term liquidity. It measures a company’s ability to meet its short-term obligations with its most liquid assets. The higher the ratio the better position of the company; however, if it’s too high the company could have too much inventory. The rule of thumb of this ratio is 1. To lower this ratio to a more desirable amount a company could cut cost to get rid of excess which could result in more revenue when inventory goes on sale. 212201 – 77408/58355 = 134793/58355 = 2.31
This is above industry average of .94.
Tootsie Roll’s quick ratio of 2.31 indicates it is in a good position but when comparing it to industry average it may have too much inventory on hand. Debt to Equity:
Total Liabilities/Total Shareholders’ Equity
Debt to equity is a measure of a company’s financial leverage which indicates what portions of equity and debt the company is using to finance its assets. A high ratio generally means that a company has been aggressive in financing its growth with debt. The rule of thumb for debt to equity is 1. If greater than 1, more liabilities are owed. This result could be an indicator of possible new loans. If a lot of...
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