Question: Find the income statement in the Tootsie Roll Annual Report. This is a reminder that the income statement is reported under various names. In Tootsie Roll it is reported under consolidated statements of Earnings and Retained Earnings TOOTSIE ROLL INDUSTRIES, Also the income statement is referred to as "profit/loss statement" or "earnings statement". If you are unsure if you have the correct statement look for key components in the schedules provided. For example for the income statement look for key works like "Sales" or "Cost of Sales" or "Cost of Goods Sold" or "Revenue". The balance sheet is sometimes referred to as "Statement of Financial Position".
Using the Tootsie Roll 2016 Annual Report answer the following questions
1. Name two competitors of Tootsie Roll
2. Compare and contrast the market caps of the two competitors named above with Tootsie Roll
3. Consider each expense on Tootsie Rolls income statement. Is this expense mostly fixed, or mostly variable? What assumptions did you make in determining whether the expense was mostly fixed or variable?
4. Assume that 20% of Tootsie Roll's operating expenses are fixed. What is the trend in the contribution margin ratio over the last three years? What is the trend in the breakeven point for operations, measured in sales dollars, over the last three years? What is the trend in the margin of safety?
5. Assume that 60% of Tootsie Roll's operating expenses are fixed. What is the trend in the contribution margin ratio over the last three years? What is the trend in the breakeven point for operations, measured in sales dollars, over the last three years? What is the trend in the margin of safety?
6. Assuming that the total dollar amount of fixed costs remains the same as in your computations for #4 above, how would operating income change if sales decline by 10%? How would operating income change if sales increase by 10%?
7. Assuming that the total dollar amount of fixed costs remains the same as in your computations for #5 above, how would operating income change if sales decline by 10%? How would operating income change if sales increase by 10%?
8. Prepare a memo to the CEO interpreting the results of the analyses for the most recent year. Discuss your key assumptions and the importance of those assumptions to the analysis.