Tootsie Roll Industries, Inc. Loan Package
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…show more content… Although debt to total assets has risen slightly, the amount of current liabilities has dropped by $4M and the cash debt coverage ratio has improved. This shows that Tootsie Roll can handle taking on a loan for $15M. When looking at profitability from 2006 to 2007, the ratios show that performance suffered. Profit margin, return on assets, and earnings per share have all dropped. However, net cash provided by operations exceeds 2006 amounts and almost matches that of 2005. Taking all of these ratios into account, Tootsie Roll’s financial standing is strong but could be improved by taking on a loan and investing wisely.
Justification for Loan: Corporate Strategy 2008 According to Tootsie Roll’s annual report (Kimmel et al., Appendix A, 2009), the organization has a forward financial make-up and historically upholds a conservative financial policy. The organization employs the services of professional money managers and supports investment policy guidelines while stressing quality and liquidity to reduce latent loss exposures in the event of adverse events. As shown in the ratios chart, working capital has increased by $13M. Maturities of short-term investments and cash flow from operations are projected to be sufficient to sustain the company’s overall financing needs, including capital expenditures. The following corporate strategic plan identifies a project that needs financial backing. How will the requested $15M loan be budgeted in 2008? A strategic