Accounting Financial Analysis

2. Guideline Establishment

3. Learning Objectives

4. Accounting and Financial Analysis

5. Two Types of Accounting

6. Audit for Control

7. Two Major Financial Statements

8. Sample Income Statement

9. Assets Current assets Cash $ 200,000 Marketable securities 300,000 Accounts receivable 500,000 Inventory 1,000,000 Total current assets $ 2,000,000 Fixed assets Plant and equipment $10,000,000 Less accumulated depreciation 2,000,000 Net fixed assets $ 8,000,000 Total assets $10,000,000 ========== Liabilities & Owner’s Equity Current liabilities Accounts payable $ 600,000 Notes payable 400,000 Total current liabilities $ 1,000,000 Long-term debt $ 5,000,000 Common stockholder’s equity Common stock $ 3,000,000 Retained earnings 1,000,000 Total owner’s equity $ 4,000,000 Total liabilities and owner’s equity $10,000,000 ==========

10. Ratio Analysis Liquidity Efficiency Profitability Leverage

11. Liquidity Ratios Measures a firm’s ability to meet its short term obligations

12. Measures how well the firm is managing its assets Efficiency Ratios

13. Profitability Ratios Measures a firm’s ability to generate revenue in excess of expenses 1. Return on Assets ? measures the amount of net income generated by every $ invested in assets

14. Profitability Ratios 2. Return on Sales (Net Profit Margin) ? measures how much profit was earned for each sales $

15. Leverage or Debt Ratio An important indicator of a firm’s financial strength Debt-to-Equity Measures the degree to which a firm relies on borrowed funds vs. from owners

16. Tootsie Roll Industries, Inc.Annual Report 2007

17. Assets (in thousands) Current assets Cash & cash equivalents $ 57,606 Marketable securities (Investments) 41,307 Accounts receivable & other receivables 35,284 Inventories 57,402 Other current assets 8,127 Total current assets $ 199,726 Fixed assets Land $ 19,398 Buildings, machinery & equipment 358,295 Less accumulated depreciation 176,292 Net fixed assets $ 201,401 Other assets 411,598 Total assets $ 812,725 ======== Liabilities & Owner’s Equity Current liabilities Accounts payable $ 11,572 Dividends, notes, & taxes payable 46,400 Total current liabilities $ 57,972 Long-term debt $ 116,523 Common stockholder’s equity Common stock $ 481,478 Retained earnings 156,752 Total owner’s equity $ 638,230 Total liabilities and owner’s equity $ 812,725 ========

18. Tootsie Roll Industries, Inc. – 2007 Income Stmt

19. Tootsie Roll Industries, Inc.Annual Report 2008

20. Assets (in thousands) Current assets Cash & cash equivalents $ 68,908 Marketable securities (Investments) 17,963 Accounts receivable & other receivables 34,196 Inventories 55,584 Other current assets 11,328 Total current assets $ 187,979 Fixed assets Land $ 19,307 Buildings, machinery & equipment 388,878 Less accumulated depreciation 190,557 Net fixed assets $ 217,628 Other assets 406,485 Total assets $ 812,092 ======== Liabilities & Owner’s Equity Current liabilities Accounts payable $ 13,885 Dividends, notes & taxes payable 45,367 Total current liabilities $ 59,252 Long-term debt $ 118,070 Common stockholder’s equity Common stock $ 491,898 Retained earnings 142,872 Total owner’s equity $ 634,770 Total liabilities and owner’s equity $ 812,092 ========

21. Tootsie Roll Industries, Inc. – 2008 Income Stmt