Tootsie Roll Industries Inc. Loan Package - Essay Example

Tootsie Roll Industries Inc. Loan Package Introduction Tootsie Roll Industries Inc. is a candy manufacturer that has been in existence since 1896. While the organization produces a variety of confectionary products it gained its greatest attention from the development and production of tootsie rolls. These are candies that take on a cylindrical form and chocolate taste. This specific grant request is directly related to development concerns of this candy. Specifically, the organization is attempting to develop a mini-Tootsie roll with a dark chocolate center.

This proposal then constitutes a consideration of these elements as related to the development of this product. Part ILiquidity Ratios Working Capitol = $141,754 Tootsie Roll Industries has a great pool of working capitol. In many cases companies can borrow money cheaper than spending their working capitol. As an example if the 10% increase in liabilities for Tootsie Rolls Industries costs them less in interest than the money will generate in revenue, then the investment is well worth the increase.

On the other hand, if the increase in revenue generated is projected to be less than the 10% increase in liabilities than Tootsie Roll Industries would be better served looking for other funding sources. Solvency Ratios Debt to total assets Ratios =Total Liabilities/Total Assets = (638,230 + 7500)/$812,725 = .7945 This means that the organization has more than enough money to cover all of their outstanding debt. In fact, they have over 20% more assets than liabilities at the end of the period.

Profitability Ratios Gross Profit Rate = Gross Profit/Net Sales $165,047/$492,742 = 33.50 This means that every hundred dollars in sales the company keeps $33.50 in gross profit. Based on these numbers the company is in very good financial shape. Even with the planned increase of 10% in the companies liabilities the company will have a positive debt to total assets ratio.Part II The following proposal justifies the loan for expansion inside our Tootsie Roll Industries and increase total liabilities by 10%.

We are expanding our current Tootsie Roll candies by creating a “mini” Tootsie Roll with a dark chocolate center. Product studies show that this new product is very popular among test sites. By re-directing a portion of our high volume sales to major distributors whose sales have remained on par or below average per quarter since 2010, we can increase total revenue and re-branding of our Tootsie Roll products. The candy industry market is saturated and very competitive. Large end competitors produce high volume candies and distribute to wholesale distributors for average profit.

Our goal is to target the customers who also purchase the wildly popular Tootsie Roll product by adding a new dimension and re-energizing our existing customer base and introducing new customers with this product line. The loan provides the additional revenue required to produce the new product at low costs and distributed to targeted distributors for sale. By creating a new product and re-energizing our existing customer base, we will grow our brand while delivering high quality candies. The change in strategy increases revenue, generates more tax dollars, and expands the Tootsie Roll brand into the next century.

Part III As noted the loan will be implemented for the development of a mini-Tootsie roll with a dark chocolate center. Within this context of recognition there are a number of further considerations. As noted the will provide the additional revenue required to produce the new product at low costs and distributed to targeted distributors for sale. There are a number of specific steps within this context of recognition. The first areas the loan will go to are research and development. This department is tasked with the chemical development and manufacturing of products ("Research and development," 2011).

While the organization already has developed a concept for the product, further development is necessary to bring it to market. The loan will then be implemented in the establishment of a number of changes to manufacturing plants. The organization currently has a well-established manufacturing infrastructure, however this is largely implemented for the production of the traditional Tootsie roll candy. Because of the logistical changes with this new Tootsie roll model, with the dark chocolate interior, there is the recognition that its implementation will require new manufacturing capabilities.

The loan then will allow the construction of these elements. Finally there are branding and marketing elements that must be implemented in the promotion of a product. It’s recognized that branding is an essential element of product development and success (Solis, 2012). While the current Tootsie Roll has a well-entrenched brand identity, the introduction of a mini-Tootsie Roll marks a significant change. There is the risk then that the consumers will reject the product. The loan then will contribute to successfully marketing the product through well-placed advertisements.

Conclusion In conclusion, this proposal has been constituted as a means of receiving a loan for the development and production of a mini-Tootsie roll. The proposal has considered the organization’s financial statements. This analysis revealed that the organization has a high amount of working capital. In terms of solvency the organization is additionally well situated, as they have limited debt. Additionally, they produce a general level of profitability per product. The company believes it is in a strong position to succeed from the product’s manufacture, as it will build on the already well-established Tootsie roll brand.

The loan then will ultimately provide the additional revenue required to produce the new product at low costs and distributed to targeted distributors for sale. ReferencesResearch and development. (2011). Retrieved from http://www.investopedia.com/terms/r/randd.aspSolis, B. (2012). the importance of brand in an era of digital darwinism. Retrieved from http://www.briansolis.com/2012/03/the-importance-of-brand-in-an-era-of-digital- darwinism/