Tootsie Roll Industries Inc. Loan Package

Jun 8th, 2014
KateS
Category:
Accounting
Price: $5 USD

Question description

I ONLY 250 WORDS FOR THIS PORTION

oAn explanation of how the company plans to use the proceeds from the loan and of how loan approval might affect the company?

You really answer the first part of this requirement above when you describe your strategy.  You do not need to restate it here.  The question is how might the loan approval affect the company?  In particular, what changes might there be in the ratios you calculated in the first requirement?  What possible impacts would the additional debt have on shareholders?  These would be positive and negative consequences.  Discuss any other possible impacts identified by the team.


I WILL PROVIDE ADDITIONAL DETAILS


Learning Team Assignment Details

Hello everyone,

This message gives you some details to assist each team in completing the week 3 learning team assignment.  A grading rubric for the assignment is posted with the assignment itself in the assignments section below.   Below is each section of the assignment in italics as stated in the syllabus with comments below each section.

·Prepare a loan package of approximately 1,250 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:

oA 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.

You should calculate 2 to 3 ratios for two years for each category.  You need to calculate ratios for all three categories—liquidity, solvency, and profitability. Calculate the ratios in an Excel spreadsheet using formulas so I can see how you calculated each one.  Show the ratios in a table similar to this one in your paper.

THE ABC FACTORY, INC. FINANCIAL RATIOS

20XX

20XX

Solvency Ratios

Solvency Ratio1

0.60

0.51

Solvency Ratio 2

0.38

0.24

Liquidity Ratios

Liquidity Ratio 1

0.004

-0.031

Liquidity Ratio 2

1.02

0.83

Use the financial statements for Tootsie Roll that are in the text.  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?  At the end of this section, make an overall statement of the team’s opinion on the overall financial position of the company.

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 thecompany 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.

Below is the second requirement of the assignment.  You need to provide:

oA justification of the reason the company needs this loan; the purpose might be for expansion, inventory purchases, debt retirement, and so on

Read the material at the beginning of the financial statements and in particular “Management’s Discussion and Analysis of Operations” that starts on page A-6.  The team needs to agree upon the purpose for the loan.  If you were Tootsie Rolls’ management, what would your goals be?  Would you want to expand your product lines?  Would you want to retire higher cost debt with lower cost debt?  A company borrows money to accomplish a strategy.  What is your strategy?   You need to convince the bankers of the soundness of the strategy.

Below is the third requirement of the assignment.  You need to provide:

oAn explanation of how the company plans to use the proceeds from the loan and of how loan approval might affect the company?

You really answer the first part of this requirement above when you describe your strategy.  You do not need to restate it here.  The question is how might the loan approval affect the company?  In particular, what changes might there be in the ratios you calculated in the first requirement?  What possible impacts would the additional debt have on shareholders?  These would be positive and negative consequences.  Discuss any other possible impacts identified by the team.

At the end of the paper, write an overall conclusion stating why you believe the increase in debt is supported by your strategy and need for the funds.  You will submit two filesfor this assignment—the paper and the supporting Excel worksheet.  Please let me know if you have any questions.


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