Tootsie Roll Industries Loan Package Essay Example

a specified timeframe. Three crucial ratios for investors to consider are profit margin ratio, gross profit rate, and payout ratio.

The profit margin ratio, obtained by dividing net income by net sales, determines the relationship between sales and net income. In 2007, there was a 10% increase in net income per dollar of sales. Another important ratio to consider is the gross profit rate, calculated by dividing gross profit by net sales.

The importance of the ratio lies in its ability to demonstrate the company's capability to generate a sales price higher than the cost of goods sold. Conversely, investors find the payout ratio interesting as it indicates the percentage of net income distributed as dividends. Liquidity is a crucial indicator of financial health and involves evaluating a company's ability to fulfill short-term obligations by comparing its most liquid assets - those easily convertible into cash - with its short-term liabilities (Kimmel, Weygandt, ; Kieso, 2009, p. 73).

According to Kimmel et al., negative working capital can put a company at risk of bankruptcy because it may not have enough cash to pay its short-term creditors. Conversely, positive working capital indicates that a company has enough cash reserves to settle its current debts when necessary. The formula for calculating working capital is (Current Assets) - (Current Liabilities). In 2007, Tootsie Roll Company's working capital was determined as 199726 - 57972 = 141,754. Similarly, in 2006, the calculation resulted in a working capital of 190917 - 62211 = 128,706. The current ratio evaluates a company's ability to meet short-term obligations using its short-term assets. For every dollar of liabilities incurred by Tootsie Roll Company, there are $3.0 or $3.10

worth of current assets available. Since the current ratio exceeds 1 in both cases, the company is likely to face minimal liquidity difficulties if needed.

Tootsie Roll Industries has a current ratio of approximately 3.45:1 in 2007 and 3.1:1 in 2006, which is determined by dividing its current assets by its current liabilities.

The company's current cash debt ratio indicates an improved financial status in 2007 compared to the previous year, with a ratio greater than 1 indicating the ability of its cash and easily convertible investments to meet short-term obligations.

To calculate the cash ratio, divide the cash from operations by the average current liabilities. In 2007, this ratio was about 1.55, while in 2006 it was only around .89.

Overall, Tootsie Roll Industries has a strong financial standing and plans to obtain a loan for expanding its brand and reaching a wider customer base.

Tootsie Roll Industries plans to differentiate itself from competitors and grow its market share by introducing new flavors. The loan will be utilized for researching, developing, effectively marketing, and launching new types of candies. The primary focus will be on expanding the 'Healthy Living' category by offering gluten-free, fat-free, peanut-free, and nut-free treats. Research conducted by Osborne et al. has demonstrated a global increase in food allergies.

Tootsie (2011, p.11) states that a small number of confectioners can cater to the substantial consumer market for confectionery products. Moreover, there is an increasing need for kosher certified products in recent times. Luckily, the company has obtained the OU-Kosher certified label and is adequately prepared to fulfill this demand.

T ootsie Roll Industries has a strong commitment to company expansion and growth. The loan we receive will be

used to upgrade existing equipment and replace outdated machinery with energy-efficient alternatives. This is an essential step for our company to reduce future expenses, considering the rising energy costs every year. By making these improvements over the next decade, we anticipate saving more than $500,000 in energy expenses.

Our savings will be used for paying off liabilities, purchasing equipment, and expanding our company. Additionally, Tootsie Roll Industries plans to increase its advertising efforts to inform the market about our diverse range of new products. To ensure the demand for these products in the market, we have conducted research on the gluten-free diet. The research indicates that currently 15-25% of consumers purchase gluten-free products (Voiland, 2008). Furthermore, the gluten-free industry has witnessed substantial growth and is now valued at $2.6 billion (Bryant, 2011).

Our advertising campaign will highlight the new kosher (OU) certification of our popular products, which has opened up opportunities to reach a wider customer base. According to LUBICOM Marketing Consulting, LLC (2011), there are currently 12,250,000 people in the United States who purchase kosher goods. Through assertive marketing efforts, we aim to raise public awareness about our healthy and high-quality products.

Conclusion

The loan package highlights Tootsie Roll Industries' consistent addition of net income at a rate of 10%, along with maintaining a healthy profit margin. This makes the company attractive to investors as 34% of the net income is distributed to shareholders.

The company is financially stable, with an increase in working capital over the past three years and a strong financial position showing four times the amount of assets compared to liabilities. In terms of revenue, the company has been steady and has experienced growth

in profit margins. The company's plans for the loan include investments in research, development, and marketing of new products that are kosher friendly, healthy, and allergen-free. Additionally, they plan to update their factories with energy-efficient equipment. With this loan, Tootsie Roll Industries has a unique opportunity to expand their brand, products, and customer base. They are committed to being responsible stewards of the financial support received and have the capability to repay the loan.

References

1. Bryant, Shannon (2011). Gluten-free foods, beverages become more mainstream as part of healthy lifestyle. Retrieved from: http://www. marketingforecast. com/archives/10536
2. Kimmel, P. D.

Weygandt, J. J. and Kieso, D. E. published the "Accounting: Tools for business decision making" book in 2009, which is the 3rd edition.

) Hoboken, NJ: John Wiley & Sons.

The source of the information is from lubicomkosher.com/industry/179/ and Martin, L. L. (2001) provides financial management insights for human service administrators. The information can be accessed at https://ecampus.

phoenix.edu/content/eLibrary2/content/eReader.aspx?assetMetaid

Osborne, N. J., Koplin, J.

J. , Martin, P. E. , Gurrin, L.

C. Thiele, L. L., Tang, M.

L. and Allen, K. J. conducted the HealthNuts population-based study of paediatric food allergy in 2010, which emphasized the research's validity, safety, and acceptability.

The article "Clinical & Experimental Allergy" has a citation format of 40(10), and the page numbers are 1516-1522. The DOI number for this article is doi:10.111/j.1365-2222.2010.This text is a citation containing a URL for a website.

The financial report for 2011 of Tootsie Roll Industries, Inc. can be found at tootsie.com/financial/fin_127.pdf. The Orthodox Union has approved additional information regarding the placement of the Kosher symbol on packages of Tootsie Roll Industries candy. For further information,

please visit http://www.tootsie.

com/comp_news.php

;li;Voiland, A. (2008, October). Gluten-free diet: a cure for some, a fad for most. U.;/li;

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