Acct 561 Tootsie Roll Essay

Tootsie Roll Industries Inc. Loan Package

ACC/561 ACCOUNTING

September 1, 2011

Michelle Yeager, CPA

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* Tootsie Roll Industries Inc. Loan Package

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* Tootsie Roll Inc. is currently seeking a business loan to take advantage of market opportunities presented in the expanding global economy. The company, through a professional approach to marketing, experienced management, and an emphasis on outstanding customer support and service, can become the premier confectioner distributor in the world. The purpose of this paper is to discuss a viable loan package to secure a loan for the company that would increase its total liabilities by 10 percent. Also, it will provide discussion on different types of ratio analysis, justification reasons for the loan, and the company’s plan on how to use the loan proceeds and its impact to the company.

Ratio Analysis

Ratio analysis is used to evaluate relationships among financial statement items. The ratios are used to identify trends over time for one company or to compare two or more companies at one point in time. Financial statement ratio analysis focuses on three key aspects of a business: liquidity, profitability, and solvency (Kimmel, Weygandt, & Kieso, 2009).

To illustrate the use of financial ratios we will compare the 2007 financial ratios of Tootsie Roll Industries and Hershey Company. These companies are engaged in the manufacturing and sale of confectionery products. The performance ratios will be based on liquidity, solvency and profitability. These ratios will be calculated from the income statement, balance sheet and statement of cash flows.

Comparative Ratio Analysis of Tootsie Roll Industries and Hershey Company

Liquidity Ratios

Liquidity ratios measure a company’s ability to meet its short-term debt obligations without disrupting normal operation. The higher the ratio the better a company will be at meeting its short-term obligations as...