FINANCIAL REPORTING PROBLEM: Tootsie Roll Industries, Inc.
BYP13-1 Your parents are considering investing in Tootsie Roll
Industries common stock. They ask you, as an accounting expert, to make an
analysis of the company for them. Fortunately, excerpts from a recent annual
report of Tootsie Roll are presented in Appendix A of this textbook.
(a) Make a 5-year trend analysis, using 2007 as the base year, of (1)
net sales and (2) net earnings.
Comment on the significance of the trend results.
(b) Compute for 2011 and 2010 the (1) debt to assets ratio and (2) times
interest earned. (See Note 6 for interest expense.) How would you evaluate
Tootsie Roll’s long-term solvency?
(c) Compute for 2011 and 2010 the (1) profit margin, (2) asset
turnover, (3) return on assets, and (4) return on common stockholders’ equity.
How would you evaluate Tootsie Roll’s profitability? Total assets at December
31, 2009, were $836,844,000, and total stockholders’ equity at December 31,
2009, was $654,244,000.
(d) What information outside the annual report may also be useful to
your parents in making a decision about Tootsie Roll?