Your parents are considering investing in Tootsie Roll common stock. They ask you, as an accounting expert, to make an analysis of the company for them. The financial statements and the notes to the financial statements from a recent annual report of Tootsie Roll are presented at www.tootsie.com.

Instructions
(a) Make a 5-year trend analysis, using 2006 as the base year, of 

(1) Net sales and 

(2) Net earnings. Comment on the significance of the trend results.

(b) Compute for 2010 and 2009 the 

(1) Debt to total assets ratio and 

(2) Times interest earned ratio. (See Note 6 for interest expense.) How would you evaluate Tootsie Roll’s long-term solvency?
(c) Compute for 2010 and 2009 the 

(1) Profit margin, 

(2) Asset turnover, 

(3) Return on assets, and 

(4) Return on common stockholders’ equity. How would you evaluate Tootsie Roll’s profitability? Total assets at December 31, 2008, were $813,525,000, and total stockholders’ equity at December 31, 2008, was $637,021,000.
(d) What information outside the annual report may also be useful to your parents in making a decision about Tootsie Roll?