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Tootsie Roll Corporation
The financial ratio analysis provides a financial picture of a company that serves as a useful tool for investors, management and creditors. Management uses the financial ratios to improve a company's operating efficiency and achieving future growth. More importantly, investors and creditors use the financial ratios to evaluate financial health of a company. This report evaluates the financial ratio of Tootsie Roll using the company last quarter financial statements of 2013 to measure the company's profitability and liquidity. Since Tootsie Roll focuses on the manufacturing and sales of the confectionary product, the report bases the company performance on liquidity and profitability. The paper calculates the ratios from the company's balance sheet and income statements.
Objective of this report is to conduct a comparative ratio analysis of the Tootsie Roll to measure the company profitability and liquidity. The report uses the company last quarter financial statements of 2013 for the analysis.
Company Overview
Tootsie Roll Industries, Inc. is a multinational company that specializes in the manufacture and sales of the confectionary products. The company markets its products using variety of packages suitable for sale and display. The company also displays majority of its product under the trademarks such as TOOTSIE ROLL POPS, TOOTSIE ROLL, CARAMEL APPLE POPS, and other trademarks. The principal markets for the company are in the United States, Canada, and Mexico. (Security Exchange Commission, 2013).
Comparative Ratio Analysis of Tootsie Roll
Liquidity
'Liquidity ratios...
This paper uses the current ratio and quick ratio to measure ability of Tootsie Roll to meet its short-term obligation.
Current Ratio
Current ratio is a liquidity ratio that measures the ability of Tootsie to meet its short-term obligations. (Beechy, & Conrod.2013 p 19). A company that records current ratio that is more than one has better ability to settle its short-term obligations. The formula to measure the company current ratio is as follows:
Current Ratio = Current Assets / Current Liabilities
At the end of 2013 last financial quarter, the Tootsie Roll current ratio is as follows:
June 2013 Tootsie Current ratio: 193,706,000 / 62,980,000
June 2013 Tootsie Current ratio= 3.07
Overview of the company liquidity ratio at the end of the last financial quarter shows that the company has a strong ability to settle its short-term obligation such as debts, and payable. Typically, the company demonstrates higher ability to settle its short-term- obligation because the company records 3.07 as the current ratio at the end of the 2013 last quarter.
Quick Ratio
Quick Ratio is similar to current ratio because it also measures an ability of a company to measure its short-term obligation. (Beechy, & Conrod.2013 p 19). Unlike the current ratio, quick ratio does not consider inventory in the calculation. The formula to calculate quick ratio of Tootsie Roll is as follows:
Quick Ratio = (Current Assets - Inventories)…
Reference
Beechy, T.H. & Conrod J.E.D. (2012). Intermediate Accounting. (Fifth Edition) .McGraw-Hill. Ryerson Limited, Canada.
Security Exchange Commission (2013). Tootsie Roll Industries, Inc. USA.
Wiener, Z. (2001). Financial Statement Analysis BKM Chapter 19. McGraw-Hill Company.
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