Do you believe the company has too much debt?

Do you believe the company has too much debt?

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Accounting Assignment (MD&A)

INSTRUCTIONS:

A ratio analysis of the financial statements for Tootsie Roll Industries Inc., including several types of liquidity, solvency, and profitability ratios and an explanation of each ratio.

 

Management Discussion and Analysis

 

The management discussion and analysis (MD&A) section covers various financial aspects of a company, including its ability to pay near-term obligations, its ability to fund operations and expansion, and its results of operations. Management must highlight favorable or unfavorable trends and identify significant events and uncertainties that affect these three factors. This discussion obviously involves a number of subjective estimates and opinions. A brief excerpt from the MD&A section of Tootsie Roll`s annual report is presented in Illustration 1-10.

Tootsie Roll Industries Inc. Loan Package

Prepare a Ratio Analysis of the financial Statements of Tootsie Roll Industries, Inc. (1st Section of a loan package) of approximately 450 words to secure a loan for Tootsie Roll Industries Inc. that would increase the company`s total liabilities by 10%.  Your loan package should include the following:

**A ratio analysis of the financial statements for Tootsie Roll Industries Inc., including several types of liquidity, solvency, and profitability ratios and an explanation of each ratio.

Use the financial statements for Tootsie Roll that is enclosed at the end.  Do not use more current financial statements from the Internet or other sources.

 

The assignment says above to provide “an explanation of each ratio”.   What you need to do is comment on the ratios themselves and the trend. 

  • For example, do you believe the company has adequate liquidity? 

Comment on the debt ratios and the trends:

  • Do you believe the company has too much debt? 

What about the profitability ratios and the trends? 

  • Is the trend from one year to the next getting stronger or weaker for all of the ratios?

The ratio section is the first section of the paper.  You also need to submit the spreadsheet as support for your ratio calculations.

Do Not:

-Put definitions of the ratios in the paper or in the spreadsheet--we all know the definitions.

-Do not include the financial statements of the company in the paper. 

-Do not include any summary financial statement data other than balance sheet and income statement numbers in the spreadsheet to show how you calculated the ratios. 

  • At the end of this section, make an overall statement on the overall financial position of the company.
  • A justification of the reason the company needs this loan; the purpose might be for expansion, inventory purchases, debt retirement, and so on
  • An explanation of how the company plans use the proceeds from the loan and of how loan approval might affect the company

RE:  Paul D. Kimmel, PhD, CPA; Jerry J. Weygandt, PhD, CPA; and Donald E. Kieso, PhD, CPA; Accounting, 4th Edition. ISBN-13 978-0-470-53478-6 - John Wiley & Sons, Inc., Hoboken, NJ, http://www.wiley.com

Loan Package at (http://www.sba.gov/) or on other websites, such as the SCORE website (http://www.score.org/). Research the specific loan package requirements of creditors, such as American Express, by reviewing their websites.

Cite your sources consistent with APA guidelines.

CONTENT:

AccountingNameUniversityDateAccounting assignmentThe ratios of the company include the liquidity, solvency and the profitability ratios calculated from the financial statements. First are the liquidity ratios. These include the current ratio and the acid test ratio. The company`s financial statements give a current ratio of 1.13. The current ratio is generated by dividing the current assets by the current liabilities. In addition to that, the calculation of the company`s acid test ratio gives a ratio of 0.8. Subtracting the inventories from the current assets then dividing the value by the current liabilities gives the acid test ratio. Not only those, but another liquidity ratio that can be used is the working capital computed by subtracting the current liabilities from the current assets, giving a value of 24749.Using net income, depreciation, short term and long term liabilities, we can get to calculate the company`s solvency ratio, which shows the sufficiency of the cash flow to meet the short and long term liabilities CITATION Alt12 l 1033 (Altman, 2012). A calculation of the company`s solvency ratios indicates the position of the firm within the industry. The first solvency ratio is the debt to total ass

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