Tootsie Roll Industries, Inc
BYP 13-1 FINANCIAL REPORTING PROBLEM
(a) TOOTSIE ROLL INDUSTRIES, INC. Trend Analysis of Net Sales and Net Earnings For the Five Years Ended 2001
Base Period 1997—($ in thousands)
2001 2000 1999 1998 1997 (1) Net sales
Trend $423,496
113% $427,054
114% $396,750
106% $388,659
103% $375,594
100%
(2) Net earnings
Trend
65,687
108%
75,737
125%
71,310
118%
67,526
111%
60,682
100%
This analysis of Tootsie Roll shows a favorable trend in net sales over the past five years. Tootsie Roll showed a steady increase from 1997 through 2000. Net sales declined slightly from 2000 to 2001. The net earnings trend is also favorable from 1997 to 2000. 2001 shows a significant decline in net earnings. The reasons for such decreases in profitability measures during 2001 would require further investigation.
(b) (000’s omitted)
(1) Debt to Total Assets
2001: ($618,676 – $508,461) ÷ $618,676 = .178 2000: ($562,442 – $458,696) ÷ $562,442 = .184
(2) Times Interest Earned
2001: ($100,787 + $356) ÷ $356 = 284.1 times 2000: ($117,808 + $866) ÷ $866 = 137.0 times
Tootsie Roll’s long-term solvency is not in jeopardy. The debt to total assets ratio indicates that creditors are providing only 18% of Tootsie Roll’s total assets. Also, Tootsie Roll easily has the ability to pay interest payments when they come due as indicated by the times interest earned ratio of over 200 times. BYP 13-1 (Continued)
(c) (000’s omitted)
(1) Profit Margin
2001: $65,687 ÷ $423,496 = .16 2000: $75,737 ÷ $427,054 = .18
(2) Asset Turnover
2001: $423,496 ÷ [($618,676 + $562,442) ÷ 2] = .72 times 2000: $427,054 ÷ [($562,442 + $529,416) ÷ 2] = .78 times
(3) Return on Assets
2001: $65,687 ÷ [($618,676 + $562,442) ÷ 2] = .111 2000: $75,737 ÷ [($562,442 + $529,416) ÷ 2] = .139
(4) Return on Common Stockholders’ Equity
2001:
(a) TOOTSIE ROLL INDUSTRIES, INC. Trend Analysis of Net Sales and Net Earnings For the Five Years Ended 2001
Base Period 1997—($ in thousands)
2001 2000 1999 1998 1997 (1) Net sales
Trend $423,496
113% $427,054
114% $396,750
106% $388,659
103% $375,594
100%
(2) Net earnings
Trend
65,687
108%
75,737
125%
71,310
118%
67,526
111%
60,682
100%
This analysis of Tootsie Roll shows a favorable trend in net sales over the past five years. Tootsie Roll showed a steady increase from 1997 through 2000. Net sales declined slightly from 2000 to 2001. The net earnings trend is also favorable from 1997 to 2000. 2001 shows a significant decline in net earnings. The reasons for such decreases in profitability measures during 2001 would require further investigation.
(b) (000’s omitted)
(1) Debt to Total Assets
2001: ($618,676 – $508,461) ÷ $618,676 = .178 2000: ($562,442 – $458,696) ÷ $562,442 = .184
(2) Times Interest Earned
2001: ($100,787 + $356) ÷ $356 = 284.1 times 2000: ($117,808 + $866) ÷ $866 = 137.0 times
Tootsie Roll’s long-term solvency is not in jeopardy. The debt to total assets ratio indicates that creditors are providing only 18% of Tootsie Roll’s total assets. Also, Tootsie Roll easily has the ability to pay interest payments when they come due as indicated by the times interest earned ratio of over 200 times. BYP 13-1 (Continued)
(c) (000’s omitted)
(1) Profit Margin
2001: $65,687 ÷ $423,496 = .16 2000: $75,737 ÷ $427,054 = .18
(2) Asset Turnover
2001: $423,496 ÷ [($618,676 + $562,442) ÷ 2] = .72 times 2000: $427,054 ÷ [($562,442 + $529,416) ÷ 2] = .78 times
(3) Return on Assets
2001: $65,687 ÷ [($618,676 + $562,442) ÷ 2] = .111 2000: $75,737 ÷ [($562,442 + $529,416) ÷ 2] = .139
(4) Return on Common Stockholders’ Equity
2001: