Acid-Test Ratio The acid-test ratio is a more conservative liquidity ratio because only the current assets easiest to convert into cash are included. Those are: cash, short-term investments, and accounts receivable. Inventory and other current assets more difficult to convert into cash are not included. The acid-test ratio for Tootsie Roll Industries is calculated below: Acid-Test Ratio = Cash + ST Investments + A/R Current Liabilities = $222.4 million $72.0 million = 3.08 Tootsie Roll’s acid-test ratio of 3.08 means the company has three times as much cash, short-term investments and accounts receivable than current liabilities. The company can easily cover its short-term debt obligations. The next chart illustrates how Tootsie …show more content…
It is calculated by dividing the cost of goods sold by the average inventory. Average inventory is calculated by adding the beginning and ending inventory for Tootsie Roll Industries and dividing the sum by two. Inventory Turnover = Cost of Goods Sold Average Inventory = $340.9 million $66.3 million = 5.14 Tootsie Roll’s inventory turnover is 5.14. This means that five times during the year, Tootsie Roll had to replace its inventory. This is good because a high inventory turnover is better than a low one. Let’s look at how Tootsie Roll’s inventory turnover compares with Hershey and Nestle. Figure 4Inventory Turnover for a Few Example Companies The inventory turnover for both Hershey and Nestle is 5.16 times. So Tootsie Roll’s inventory management is consistent with its competition. Measuring Profitability Ratios Profitability ratios measure a company’s ability to use its assets efficiently to produce profits. These ratios provide users of financial information with useful data such as how much net income is generated from each dollar of revenue and how much net income is generated per share of stock. Return on Sales …show more content…
Financial ratios: a percent, rate, or proportion that expresses a mathematical relationship between two financial quantities Liquidity ratios: evaluates how quickly a company can convert short-term assets and liabilities into cash Current ratio: evaluates a company’s ability to pay its short-term debt (current liabilities) Comparing financial data: examining financial data from multiple years to see trend lines for key measures such as net income, revenues, cost of goods sold, operating expenses, and gross margin Acid-test ratio: a more conservative liquidity ratio that evaluates how quickly cash, short-term investments, and accounts receivable can be converted into cash Inventory turnover: how long a company holds onto its services or products (inventory) Profitability ratios: measurements which reflect a company’s ability to use its assets efficiently to produce profits Return on sales/profit margin: provides insight into how efficiently and profitably a company is being run, determined by dividing net income after taxes by net sales Ratio analysis: using comparisons to gather information and see trends Basic earnings per
I nventory Value + Purchases – Current Inventory Value = Costs of Goods Sold Cost of Goods Sold / Actual Net Sales = Food Cost percentage Jeremy states that the improvements to the inventory system over the last few years have helped him run his business better.
Tootsie Roll Industries has implemented several internal growth strategies to maintain a competitive advantage. First, Tootsie Roll has engaged in market penetration through their advertising campaigns on television and the expansion of their advertising efforts internationally. Second, the company has used the market development internal growth strategy through extending their sales efforts globally. Right now, Tootsie Roll has expanded into the Far East and Europe, along with various other regions. Additionally, Tootsie Roll has most recently participated in market development through selling their products in warehouse clubs, grocery stores, retail stores, convenience stores, and drug chains.
For the class project, I chose to research Hobby Lobby. Hobby Lobby interests me because the owners run their business according to their beliefs. When laws go in effect that counter their beliefs, they fight for their beliefs and stand up to the government. David and Barbara Green stand up for what they believe in and run one of the top three craft and hobby stores in the nation. David and Barbara Green are the founders and owners of Hobby Lobby.
Tootsie Roll Industries have implemented several internal growth strategies to ensure company success. First, Tootsie Roll has engaged in market penetration through their advertising campaigns on television domestically and internationally. Second, the company has used market development by extending their sales efforts into international regions, such as the Far East and Europe, and through expanding their sales efforts in warehouse clubs. Third, Tootsie Roll has used product development by creating new package designs for its Warner-Lambert products. Fourth, Tootsie Roll has used vertical integration by using corn syrup as a substitute for sugar and creating its own refinery.
Finally, there is total assets turnover, which shows how efficient managers are using assets to generate revenue. It will allow Whole foods to
Their current ratio improved from 1.59 to 2.44 which shows the ability to cover current liabilities has improved. Massachusetts Stove Company strategically made decisions to not only increase their current assets quickly but also managed their liabilities to keep them from growing out of control. This means that the company could cover current liabilities at any time relatively easily with their cash, receivables, or other current assets. In terms of the market, Massachusetts Stove Company does have the demand of 220,000 active prospects they could try to sell stoves too if a dire need arose for quick cash. Management even brought their quick ratio to 1.08.
a) Allocation, Valuation and Accuracy Inventory is a Current Asset in a Balance Sheet. The inventory was valued by using an incorrect code for the more expensive items of inventory. Probably, there is an error or the management was trying to provide a better picture of its financial position. If a misstatement of inventory has occurred there will be an impact on what the company reports as profit. An inaccurate record of inventory will result in the company not knowing its inventory position and not being able to meet customers’ orders.
Inventory, is the types of good gathered to resale to make profit and operational expenses are the cost
The company increased its long-term debt from 20 million to over 530 million from 2006 to 2011. This significantly increased its Debt to Equity Ratio from 0.18 to 1.17 over the previous fiver years. The increase in debt also hindered the company's current ratio and interest coverage ratio as time went on. As seen by the debt covenants and the decline in AP days, creditors began to feel uneasy about the amount of debt being taken on by the company. In a relatively short period of time a walnut distributor had taken the snack segment by storm and was poised to make a multi-billion dollar bid for Pringles.
Throughout the years, several different methods have been developed, which are dependent on the respective regulations of countries and institutions, such as the Internal Revenue Service (IRS). The most common inventory methods include FIFO (first-in, last-out), LIFO (last- in, first-out), HIFO (highest-in, first-out), FEFO (first-expired, first-out), as well as the average costing method (AVCO). Each of them has their specific advantages and disadvantages, and comes with certain restrictions and regulations (Lee and Hsieh, 1983, p.7). This paper is going to take a look at the choice of inventory accounting methods of FIFO and LIFO, and is therefore not going to consider the other inventory accounting methods, as that goes beyond the topic of this
Current Ratio: The higher the current ratio, the more capable the company is of paying back its obligations. Meaning the more asset value relative to the value of its liabilities. As a company you don’t want to be less than 1, because that would suggest that you are unable to pay off its loans and debt. You also don’t want to be over 3, that just show’s you are not using your resources to maximizing your working capital.
Their current ratio is 1.4% (total current assets/total current liabilities). According to the Risk Management Association of Financial Ratio Benchmarks, the current average ratio is 1.5%. In 2014, the current ratio for the firm was 1.46% while the average ratio in the industry (NAICS 311330) was 1.6%. The company’s net property and equipment in 2015 is worth 2.6 million dollars, a slight increase from 2014, which was 2.3 million. The company is considering taking on some debt to increase their production capabilities.
It all began on April 14, 1902 when James Cash Penney founded in the small town of Kemmerer, Wyoming, the Golden Rule store, which had as slogan "to serve the public, as nearly as we can, to its complete satisfaction". The 26-year-old boy had the nickname "Cash" due to his opposition to moral credit. For in your store, selling merchandise only in cash. Initially, the store, in partnership with two merchants, Guy Johnson and Thomas Callahan, sold clothing and accessories, in addition to small varied products. The society was undone a few years later.
Prohibition of the last-in, first-out inventory (LIFO) method by the IFRS has been always the center of the discussion. Related to this has been the significant difference between IFRS versus US GAAP regarding the application of the lower of cost or market (LCM) measurement and reporting of inventory. US GAAP inventory rules are more conservative than IFRS inventory rules. There are four significant differences between US GAAP and IFRS. IFRS permits to use FIFO and weighted average method but LIFO is prohibited IFRS applies the lower of cost or net realizable value.
The current ratio of the Ajinomoto Berhad is stable. It is because the high current ratio shows that there are many cash in the company. They have extra money to utilize in the other area. Besides, the quick ratio of the Ajinomoto Berhad is higher and it is good for the investor to invest. It means that the company has the ability to cover the current liabilities.