Tootsie Roll Industries, Inc. Loan Package
Tootsie Roll Industries, Inc. Loan Package In week three, Learning Team E presents a loan package for public held company, Tootsie Roll Industries, Inc., in business for over 100 years. Tootsie Roll is a manufacturer of confectionery products. In addition to sales in the United States, Tootsie Roll’s profits grew in Mexico, Canada, Europe, Asia, South and Central America. This loan package consists of three sections: Financial Ratios, Corporate Strategy-2008 Project: Capital Expenditure, and Loan Approval’s Effect on Tootsie Roll Industry, Inc. Financials.
Comments on Financial Ratios and Company Financial Position Selected financial ratios were calculated and are summarized in
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A performance management model will utilize an integrated budget: project-driven and demand-driven (Cokins, 2008). The 2008 integrated budget expenditures will be shared between operational (demand driven-recurring expenses) and strategic (project driven-non-recurring expenses). The purpose of the $15M, 3-year loan is for system development to enhance current system capabilities and expansion of networking proficiencies directed at future global relations in China. Tootsie Roll has improved relations globally and part of the 2008 corporate strategy is to expand product lines into China. Corporate governance approval of a loan in the amount, no larger than 10% of 2007 total liabilities, meets the criteria stipulated. The benefits of loan approval include asset depreciation because capital expenditure permits withhold a portion of expenses over years, as the asset depreciates. Another benefit is in operational efficiency, as increased profits will result by making this investment. Financial and market risks include increased market competition, high interest rate over 5-year loan, and increased fire or natural disaster insurance premiums.
Use of Loan Proceeds and Affects on Financial Position The economy has been tough for organizations over the last several years. Tootsie Roll Industries has seen a fluctuation in the operational costs. In 2006, prices of ingredients such as syrup, sugars, and vegetable oil surged (Tootsie Roll