Case Study Tootsie Roll

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RATIO ANALYSIS: Liquidity Ratio Tootsie Roll Hershey Current ratio 2.34 0.92 Working Capital $110,376 -$102,941 Current Cash Debt Coverage ratio 1.05 0.85 Receivables Turnover Ratio 16.48 10.62 Average Collection Period 22.15 34.37 Inventory Turnover Ratio 4.66 5.10 Days in Inventory (Average Age of Inventory) 78.27 71.52 Solvency Ratios Tootsie Roll Hershey Debt-to-Total Assets ratio 0.30 0.71 Times Interest Earned (Interest Coverage) ratio 106.96 13.56 Cash Debt Coverage ratio 0.41 0.32 Free Cash Flow $43,403 Profitability Ratios Tootsie Roll Hershey Gross Profit Rate 0.42 0.40 Profit Margin Ratio 0.15 0.13 Asset Turnover Ratio 0.57 1.20 Return-on-Assets (ROA) 0.09 0.16 Earnings per Share 1.23 2.30 Payout ratio 0.23 0.35 Tootsie Roll Inc. Tootsie Roll Inc. is a strong, well established,…show more content…
does not depend on creditors much. Company’s cash debt coverage ratios are excellent. The working capital and current ratio indicates that Tootsie Rolls position to pay off its liabilities is great. The inventory turnover ratio indicates that Tootsie Rolls Inc does not hold excessive inventory that would bring additional costs. Also the average age of inventory of 78 days sounds reasonable that Tootsie Rolls Inc. can keep up with the demand. Receivable turnover ratio and average collection period tells us that Tootsie Rolls does not have any difficulties collecting the debt thus does not have additional cost. Since Tootsie Rolls Inc. is using the FIFO inventory method the gross profit rate looks inflated but overall it is in a very good healthy range. Despite the increasing material costs the company was able to keep its healthy state and was able to keep the gross profit and profit margin ratios at a desirable level even though the company’s debt is in an increasing trend the strong current ratio indicates that increasing debt is not a

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