Question

The 2011 Annual Report of Tootsie Roll Industries contains the following information.

(in millions)

December 31, 2011

December 31, 2010

Total assets $857.9 $858.0
Total liabilities 191.9 190.6
Net sales 528.4 517.1
Net income 43.9 53.0

Compute the following ratios for Tootsie Roll for 2011.

(a)Asset turnover ratio (Round answer to 4 decimal places, e.g. 0.8512 times.)
The 2011 Annual Report of Tootsie Roll Industries times.


(b)Return on assets (Round answer to 2 decimal places, e.g. 4.87%.)
The 2011 Annual Report of Tootsie Roll Industries %

(c)Profit margin on sales (Round answer to 2 decimal places, e.g. 4.87%.)
The 2011 Annual Report of Tootsie Roll Industries

Answer 1

Answer: (a) asset turnover in 2011

= 62%.

In 2010 = 61%

(b) Return on assets in 2011

= 6%

In 2010 = 7%

(c) Profit margin on sales in 2011

= 9%

In 2010 = 11%

Explanation: (a) asset turnover in 2011 is calculated using the formula,

Asset turnover = net sale/average total asset. Where net sales in 2011 is 528.4 and average total asset is 857.9, therefore

528.4/857.9 = 62%

Repeating thesame procedure for 2010=517.1/858.0 = 61%

(b) Return on assets is calculated using this formula.

Return=net income/average total asset. Where in 2011, net income is 43.9, and total asset is 857.9

Therefore in 2011 return on asset

= 43.9/857.9 = 6%

Repeating thesame procedure for 2010 values we get

53.0/858.0 = 7%

(c) Profit margin on sales in 2011 is calculated by using net income/net sales, where net information 2011 is 43.9 and net sales is 528.4, therefore

Profit margin =43.9/528.4 = 9%

Repeating same procedure for 2010 values we have that

In 2010 profit margin on sales =53.0/517.10 = 11%