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week three team A assigment - 1 Tootsie Roll Industries Inc...

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1 Tootsie Roll Industries Inc. Loan Package According to the information provided by Tootsie Roll Industries Inc, team A has attempted to complete the EFW spreadsheets that are needed for this loan package. As well as the EFW spreadsheets, team A will also include the following items in this loan package for Tootsie Roll Industries Inc.: A ratio analysis of the financial statements, as per your completed EFW spreadsheet, for Tootsie Roll Industries Inc., including several types of liquidity, solvency, and profitability ratios and an explanation of each ratio. 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 Liquidity Ratios Working Capital - Statement of Cash Flows The liquidity ratios provide measures for determining “the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash” (Kimmel, Weygandt, & Kieso, 2009, p. 673). The working capital equation calculates current assets less current liabilities. The data result reflects the liquid assets Tootsie Roll Industries, Inc. holds for potential growth. Available assets do not guarantee quick cash conversion or necessarily represent the big picture of how a company manages assets lending to great success. The liquid assets mean that the company is managing its costs effectively and able to fund itself.
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2 Current Ratios – Balance Sheet Analysis The current ratio divides the current assets by the current liabilities. This is another review of current assets to liabilities in which, on a short-term basis, a company’s survival reflects the relationship of assets to liabilities by the possibility of current asset conversion to cash with the intent to pay debt. The key of a higher ratio of assets to liabilities is significant. The idea being that “a dollar of cash is more readily available to pay the bills than is a dollar of inventory” (Kimmel, Weygandt, & Kieso, 2009, p. 59). The chart for each ratio representative of Tootsie Roll Industries, Inc. below represents a positive indication of debt coverage.
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