Dollar General Analysis

Last Updated: 20 Apr 2022
Pages: 34 Views: 730

Valuation and Analysis of Dollar General Table of Contents Executive Summary……………………………………………………1 Overview of Dollar General…………………………………………6 Five Forces Model.............................................. ……….. 9 Rivalry among Existing Firms................................ 9 Industry Growth…………………………………………. 10 Concentration…………………………………………. …. 10 Differentiation and Switching costs……………………13 Scale Economies and Fixed/Variable Costs………….. 13 Excess Capacity and Exit Barriers………………………14 Threat of New Entrants…………………………………….. 15 Economies of Scale………………………………………. 5 Channels of Distribution and Relationships………….. 16 Legal Barriers………………………………………………17 Threat of Substitute products……………………………. 17 Buyer’s willingness to switch…………………………………17 Bargaining Power…………………………………………….. 18 Bargaining Power of the Customer............................... 18 Switching Cost……………………………………………. 18 Product Cost and Quality……………………………….. 19 Number of Buyers……………………………………….. 19 Volume per Buyer……………………………………….. 19 Bargaining Power of the Suppliers……………………... 20 Switching Cost............................................... 20 Product Cost and Quality……………………………….. 0 2 Number of Suppliers………………………………….... 20 Value Chain Analysis………………………………………………... 21 Efficient Production………………………………………22 Simpler Product Design………………………………. …22 Lower Input Costs…………………………………….... 22 Low-cost Distribution…………………………………... 22 Minimal Brand Image Cost…………………………….. 23 Tight Cost Control……………………………………….. 23 Firm Competitive Advantage Analysis……………………. …... 23 Efficient Production…………………………………. …. 24 Simpler Product Design…………………………………. 24 Lower Input Costs………………………………….. ….. 24 Low-cost Distribution……………………………………25 Minimal Brand Image Cost……………. ………………. 5 Tight Cost Control……………………………………….. 25 Conclusion………………………………………………... 26 Accounting Analysis……………………………………………....... 27 Key Accounting Policies……………………………………. …28 Degrees of accounting flexibility………………………….. 30 Accounting Strategy………………………………………. ….. 32 Quality of Disclosure………………………………………. …. 34 Identify Potential “Red Flags”………………………….. …. 44 Undo Accounting Distortions…………………………. ……45 Financial Analysis………………………………………………. ……48 Trend and Cross Sectional Analysis……………………………48 Financial Ratio Analysis……………………………………………. 49 3 Liquidity Ratios……………………………………………………….. 9 Current Ratio………............................................... 50 Acid Test………………………………………………………….. 50 Quick Asset Ratio………………………………………………. 52 Inventory Turnover…………………………………………... 53 Profitability Ratios…………………………………………………... 57 Gross Profit Margin…………………………………. ………... 57 Operating Profit Margin………………………………. …….. 58 Net Profit Margin…………………………………………. …... 59 Asset Turnover……………………………………………. ……60 Return on Assets…………………………………………. ……61 Return on Equity……………………………………. …………62 Capital Structure Ratios………………………………………….. 63 Debt to Equity………………………………………. …………. 64 Times Interest Earned……………………………. ………65 Debt Service Margin………………………………. …………66 IGR/SGR Ratios………………………………………………………67 Forecasting Financial Statements……………………. ………. 70 Income Statement…………………………………….. …….. 70 Balance Sheet………………………………………. …………72 Statement of Cash Flows……………………….. …………75 Cost of Capital Estimation……………………………. …………76 WACC estimation…. …………………………………………. ……….. 78 Valuation analysis…………………………………………………. 79 Method of comparables………………………………………………80 Intrinsic Value Models……………………………………………………. 85 Discounted Dividends Model………………………………………. 85 Free Cash Flow…………………………………………………………. 87 4 Residual Income……………………………………………. ………. 88 Long Run Residual Income……………………………. ………….. 90 Abnormal Earnings Growth……………………………. ………….. 91 APPENDIX………………………………………………. 92 5 Executive Summary Investment Recommendation: Overvalued, Sell 6-1-07 DG----NYSE (6/1/07) $21. 63 52 Week Range $12. 10-$21. 85 Revenue (2/2/07) $9,169,822 Market Capitalization $6. 86 Bill Shares Outstanding 314. 88 Mill 3-Month Avg. Daily Trading Volume: Institutional Ownership 66% Book Value per Share $5. 706 ROE: 20% ROA: 12% Cost of Capital Est. 3-Month 6-Month 2-Year 5-Year 10-Year Ke Kd WACC Altman Z-Score 2003 2004 2005 7. 48 7. 88 7. 74 2006 6. 3 R2 Beta Ke . 19 1. 19 . 19 1. 19 . 19 1. 19 . 19 1. 19 . 18 1. 18 12. 09% 5. 19% 10. 99% 2007 7. 33 EPS Forecast 2008 2009 2010 . 44 . 46 . 48 Ratio comp. Trailing P/E Forward P/E PEG P/B DG 9. 53 7. 62 . 065 11. 8 2011 . 50 DLTR 22. 19 17. 78 1. 27 3. 87 2012 . 55 FDO 22. 75 18. 98 1. 61 3. 95 Valuation Estimates: Actual Price (6/1/07): $21. 63 Trailing P/E $9. 57 Forward P/E $7. 80 PEG $2. 92 P/B $54. 00 P/EBITDA $28. 24 P/FCF $123. 39 EV/EBITDA $3. 54 Intrinsic Valuations Discounted Dividend Free Cash Residual Income LR ROE AEG Actual $18. 40 $29. 71 $3. 22 $7. 21 $8. 79

Revised Z-Score 2007: 2. 847 6 Recommendation: Sell-Overvalued Industry Analysis Dollar General was founded in Scottsville, Kentucky in 1939 and was originally called J. L. Turner and Son Wholesale, then Turner’s Department Store, and then in 1955 it was converted to Dollar General and did not sell any item over $1. Dollar General was the originator of the dollar store concept and in 1968 it became a publicly traded company. “Dollar General is a Fortune 500® company and the leader in the dollar store segment, with more than 8,000 stores and $9. 2 billion in fiscal 2006 sales” (www. ollargeneral. com). Dollar General is in the discount retail store industry and focuses on cost leadership. Its direct competitors are Family Dollar Stores, Fred’s Inc. , and Dollar Tree. In this industry, maintaining low costs are crucial to generating profits, since the merchandise is already being sold at a discount and there is such high competition between companies. The competition is high due to the threat of substitute products: the products being sold are extremely similar, if not identical and pose no switching costs to customers. 7 Accounting Analysis

A major part of analyzing and valuing a firm is analyzing its methods of accounting. The information needed to do this can be found in the company’s annual 10-K report. First the key accounting policies are analyzed to ensure that they correspond with the key success factors as defined by the five forces model. Then the degree of flexibility allowed by GAAP is determined, as well as the actual accounting strategy used by the firm. The quality of disclosure is how transparent the company’s reports are and how believable their numbers are and is determined though screening ratios. These ratios lert us of any “red flags” in their accounting, and finally any distortions found are corrected to show the company more accurately. After our analysis, the only area in which Dollar General uses flexibility is in the reporting of leases, which is allowed by GAAP, but greatly alters their financial statements. While the footnotes were very clear in disclosing information, the consolidation of the financial statements makes it difficult to actually see what they are disclosing. After computing all of the revenue and expense manipulation ratios we did not find any “red flags” so the only distortion to undo was the reporting of the leases. 8

Order custom essay Dollar General Analysis with free plagiarism report

feat icon 450+ experts on 30 subjects feat icon Starting from 3 hours delivery
Get Essay Help

Ratio Analysis, Forecast Financials, & Cost of Capital Estimation Ratio analysis is done to evaluate a company and to find out how it ranks with its competitors. There are three sets of ratios used in this part of the analysis; liquidity ratios, profitability ratios, and capital structure ratios. All the information needed to compute these can be found in a company’s financial statements. In our analysis of the past five years, Dollar General has performed about average with the industry and in a few cases has out-performed the industry. Once these ratios have been calculated they can be used to forecast the company’s future performance.

By using the CAPM model, a Beta for the company can be estimated; then using the estimated Beta, the companies estimated cost of equity can be determined through regression analysis. Finally the estimated cost of equity can be computed by using the WACC formula. Valuations The main focus for valuation models are to show whether the companies estimated value is worth what the market implies. To derive such prices, you must estimate the firm’s cost of capital and equity, the growth rate, and the WACC and use them to determine how well the company’s stock is priced.

There are five different valuation models – the discounted dividends, free cash flows, residual income, long-run residual income, and the abnormal growth earnings. 9 These models use different factors in deriving the estimated share price, in which some are more accurate than others. We began with the method of comparables, which uses the current financials of Dollar General and also the financials of industry competitors. This method includes using the P/B ratio, PEG ratio, DPS, and trailing/forecasted P/E ratio.

We believe this is a good benchmark to where firms should stand when compared to the industry. For our valuation models, we based our valuations using our ten year forecasted financials. The models indicated that Dollar General is highly overvalued compared to our intrinsic valuations. The free cash flow model shows that Dollar General is undervalued; we believe this valuation is doubtful based on the uncertainty of our forecasted cash flow. After using all five models, our overall decision is that Dollar General is highly overvalued and investors should sell. 10 Overview of Dollar General

Dollar General is in the discount retail store industry selling common household necessities, such as cleaning supplies, health and beauty aids, basic food items, some clothing, and seasonal products. The target market of this corporation is people who generally have lower, middle and fixed incomes. Dollar General started out as J. L. Turner & Son, in 1939 as a wholesale business in Scottsville, Ky. The company coined the dollar store concept in 1955 opening retail stores which boosted the company’s sales. In 1968 the company went public and changed its name to Dollar General. Today, the corporate office is located in Goodlettsville, TN. www. dollargeneral. com) Sales volume and growth are very important factors for success in the discount retail industry. As shown below, sales for the industry has been rising each year for the past five years with Dollar General leading the way. Sales Volume * Dollar General Dollar Tree Stores, Inc. Family Dollar Stores, Inc. Fred’s, Inc. $1,103,418 $1,302,650 $1,441,781 $1,589,342 $1,767,239 *All numbers in thousands. (www. edgarscan. com) $1,108,637 $1,244,683 $1,380,245 $1,511,457 $1,600,264 2002 2003 2004 2005 2006 $6,100,404 $6,871,992 $7,660,927 $8,582,237 $9,169,822 $2,357,836 $2,799,872 $3,126,000 $3,393,900 $3,969,400 1 While Dollar General’s sales have exceeded their competition by far, their net income decreased this past year while the competitions’ rose. This is mainly due to the fact that Dollar General’s general expenses rose and interest income decreased. Industry Net Income * Dollar General Dollar Tree Stores, Inc. Family Dollar Stores, Inc. Fred’s, Inc. $27,491 $32,795 $27,952 $27,952 $26,746 *All numbers in thousands. Dollar General’s Stock is currently selling for $21. 63 and there are 314,788,000 outstanding shares giving it a market capitalization of $6,808,864,440.

While it has far more outstanding shares than its competitors, they are selling at a lower price. In the past year Dollar General’s price per share has remained relatively constant while its competitions’ prices have been rising. (www. nyse. com). $57,478 $64,452 $55,355 $51,389 $54,124 2002 $262,351 $145,219 2003 $299,002 $177,583 2004 $344,190 $180,300 2005 $350,155 $173,900 2006 $137,943 $192,000 12 Average Stock Prices 2003-2007 35 30 25 20 15 10 5 0 2003 2004 2005 Year 2006 2007 FRED FDO DLTR DG Price Within the past year, stock prices have been on the rise after hitting the low of 13. 2 which is the lowest it has been in two years. http://moneycentral. msn. com In comparison to its competitors, Dollar General’s stock is outperforming its competitors this year after prices fell in the third quarter last year. 13 THE FIVE FORCES MODEL The five forces model is an excellent tool used to analyze the industry in which the firm is competing in. It helps us see the type of industry the firm is competing in, what characteristics are associated with the type of industry, and also identify what types of things the firm can do to stay a head of the competition.

The five forces model includes: Rivalry among existing firms, Threats of new entrants, threat of substitute products and bargaining power of buyers and suppliers. These forces assess the degree of competition and the marketing power of buyers and suppliers. We will use the five forces model to evaluate the industry as a whole. After briefly explaining each segment of the five forces model, the model will be put to use by developing a value chain analysis. After the value chain analysis we will use the complete information to compare Dollar General with the rest of the industry.

Cost Leadership Industry Rivalry among Existing firms Very High Threats of new Entrants Low Threats of substitute products High Bargaining power of buyers Moderate Bargaining power of suppliers Moderate Rivalry among Existing Firms Dollar General is in the discount retail merchandise industry, which is highly competitive with respect to price, store location, merchandise quality, instock consistency and customer service. Since the discount retail industry is a highly concentrated industry they strive to provide merchandise at low prices, thus it is necessary to keep prices as close to marginal cost as possible. 4 Industry Growth A company striving to make it in this industry has to come up with innovative ways to grow. Most of the firms competing in this industry have found a niche in small towns because of the low and low-middle class population. In doing so, they have experienced a rapid expansion and in turn have increased their number of stores. Another element encouraging growth is the low every day prices characterized by the industry. As a result of the low prices they are able to cut costs and expand in different areas, like offering a new line of products or even increasing number of stores.

Other firms in this industry have invested in advertising, by inserting circulars in the newspapers and reaching out to different customers who don’t necessarily shop at a dollar store. Concentration Concentration plays a very big role in price setting. The more competitors in an industry the lower concentrated the industry is which creates price wars. Dollar General’s main competitors include: Family Dollar, Dollar Tree, Fred’s and 99 Cents Only. The industry is characterized by providing the every day low prices and still making a profit by having a low cost structure and relatively low assortment of products. 5 Market Percentage 2002 7% 5% 40% Dollar General Dollar Tree Family Dollar Fred's 99 cents 17% 31% 2003 9% 6% Dollar General 47% Dollar Tree Family Dollar Fred's 99 cents 1% 37% 16 2004 8% 5% 40% Dollar General Dollar Tree Family Dollar Fred's 99 cents 16% 31% 2005 8% 1% Dollar General 42% Dollar Tree Family Dollar Fred's 99 cents 17% 32% 17 2006 8% 5% Dollar General 40% Dollar Tree Family Dollar Fred's 99 cents 16% 31% Differentiation and switching costs The discount retail industry has no differentiation cost because it is a cost leadership competitive Industry.

Switching cost would be low because our merchandise is easily liquidated. It would take very little to get rid of the merchandise without losing money and switching to another industry. Scale economies and fixed/variable costs The price of the merchandise depends on how a company handles operational costs. Dollar General emphasizes aggressive management of its overhead cost structure. Additionally, they seek to locate stores in neighborhoods where rental and operating costs are relatively low. Individual Dollar General Store leases vary in their terms, rental provisions, and expiration 18 ates. Majority of the leases are low-cost and short-term ranging from three to five years. Family Dollar leases 5719 of their stores and only owns 489; this indicates that they have high fixed costs. The 99 cents only store own 37 stores and lease 105 store which again shows they have high fixed costs. The level of fixed cost plays a role in the growth of a company in this industry. If the fixed costs are too high then expansion is going to be slow. Family Dollar has 350 stores opened in 2006. The 99 cents only store has only 19 store opening this year.

Dollar General has introduced control in fixed cost which is supported by the 300 stores they plan to open this year, plus remodeling 300 other stores. In such an industry, firms must generate large inventory turnover for the fixed cost to cover variable costs. In conclusion, if a firm wants to be successful in this industry they have to make sure that they do not have too many fixed costs, because this slows down growth. If they have a lot of fixed costs then they need to make sure that they generate large inventory turnover to cover the variable costs. Excess Capacity and Exit Barriers

Excess capacity exists if the customer demand exceeds supply. In the discount retail industry, supply is always greater than demand because of the amount of competition and ease of access. Same-store sales are one way to monitor just how much sales a firm is getting. Same-store sales measure the increase or decrease in sales for the stores that have been open for more than one year. This helps a firm know just how well they are doing in comparison to the industry. There are high exit barriers in the discount retail industry mainly because it would be costly and time consuming to liquidate erchandise or break lease agreements. For these reasons, the industry requires lower cost and increases rivalry among existing firms. The discount retail industry is characterized by high exit barriers mainly due to cost of liquidation. Same-store sales are an important measure for firms 19 to use so they can see just how much they are selling and how much inventory they have left, thus avoid tying up their resources in idol inventory. THREAT OF NEW ENTRANTS The potential for earning high profits in an industry will attract new entrants to an industry.

Easily accessible industries force existing firms to compete not only with the new entrant but also amongst other firms. There are many barriers for new entrants in the discount retail industry. New entrants must rise above large economies of scale that exist within established firms. Also, suppliers will be difficult to find in the discount retail business mainly because of profitability sought by suppliers. There are few legal barriers to be faced; new firms will face some legal discretion just like in any industry. There is the possibility for entrance of new firms but there are barriers to be faced.

Economies of Scale When entering into a specific industry, economies of scale play a major role. New entrants will initially suffer from a cost disadvantage in competing with well established firms. New entrants do not have the capital and resources to compete on such a level. Dollar General and Family Dollar Stores are the two largest firms in this industry and have the upper-hand on suppliers and distribution access to their stores. This advantage poses high economies of scale allowing most of the firms in the industry to offer low prices for their customers.

The diagram below shows the level of assets possessed by the existing firms in the industry. Thus new entrants would have to acquire the minimum capital needed to enter the industry. 20 Total Assets 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2005 2006 2007 Dollar General Dollar Tree Family Dollar Fred's Inc 99 Cents Only Channels of Distribution and Relationships It is imperative for a firm to have a proficient channel of distribution and keep good relations with the supplier in order to be cost efficient. The discount retail industry is cost driven therefore making it essential for the company to be efficient.

It is difficult for new entrants to distribute their goods from suppliers without the right system. Dollar General has nine distribution centers (also used as warehouse space) of which they lease three but own the other six and has their own trucking system to deliver goods to their stores. Family Dollar has nine distributing centers, but they do not have enough trucks to distribute their merchandise. 86% of their merchandise was distributed by external carriers in 2006. In order for Family Dollar to manage this, they have a good relationship with their carriers that lead to discounts.

The 99 Cents Only lease trucks and also transport by rail. 21 Legal Barriers There are no direct legal barriers in the discount retail industry. Legal barriers exist when importing goods from other countries therefore making it costly in terms of trained personnel in international trade policies. Dollar General directly imports 14% of their goods and Dollar Tree imports 35%-40% of their goods. Companies need to be aware of certain items such as; import laws, currency exchange, and foreign business operations. New entrants have a tough hurdle to overcome when it comes to legal barriers.

With most of their products supplied by companies abroad, it would be costly and difficult for a new entrant to compete to get the same supplier or even try to lobby for the same prices. THREAT OF SUBSTITUTE PRODUCTS The discount retail industry is a highly competitive industry with five direct competitors and certain other relative competitors like Wal-mart and Target. Customers are therefore very price sensitive. Threat of substitute products is low in the discount retail industry because the products offered are generally the same across the board.

In the discount retail industry most of the firms have the same suppliers therefore the products are the same. Buyers’ willingness to switch The discount retail industry is very price conscious, therefore most the players in the industry compete in those terms. Also, since the products in the industry are the same, customers are drawn to picking the firm with the lowest price, therefore the customers switching cost is very high. 22 Bargaining Power In the Following sections, bargaining power will be discussed relative to the buyers and suppliers of the market. The industry will be examined as a lowcost, highly competitive market.

The five factor model guidelines will be used in assessing the industry. Topics that will be discussed include switching cost, product cost and quality, number of buyers, and volume per buyer. Information will be given on how a company should compete in order to be effective in a highly competitive industry. The guidelines and information will help value the companies in the industry. The next two sections will give an idea of what the industry requires of buyers and sellers. Bargaining power of the Customer In such a highly competitive market, the customers have a rather large bargaining power over the companies in the industry.

It is easy for customers to switch from store to store depending on the relative prices of each. The switching cost is merely the price of gas to drive or time to walk from one store to the next. The customers of the discount retail industry have a some what higher volume per purchase because the stores are catered to be a one stop shop for the lower/ lower middle class customer. For this reason, firms in this particular retail market have incentive to keep prices as low as possible because of the bargaining power of the customer. Switching Cost

Switching cost of the customer is a large reason why the customer has bargaining power. A customer can easily switch from one low price store to another depending on how cheap the stores products are. The price sensitivity of the buyer is relatively high because they have limited financial means. Each of the companies in the industry carry the same line of products, and the customers will look for the best prices among each. For the reasons above, it is highly 23 important where a store is located. Most companies will situate a store in or very near low-income neighborhoods. Product Cost and Quality

The particular industry does not focus as much on the product quality as it does on the price of the product. The companies in this industry will carry substitute products that are lower quality rather then name brand items in more expensive stores. The industry has to focus on the cost rather then quality because the customers demand the cheapest product possible. Number of Buyers The number of buyers in the industry is the lower middle and lower income consumers in the industry area. The discount retail industry is affected by every customer. The number of customers and amount bought determines the profitability of the company.

In essence, the customer has more bargaining power because the stores survival depends on the number of customers. It is very important for companies to keep prices low to remain attractive. Volume per Buyer The volume of products bought by a customer in the discount retail industry can vary from a few items to several. Most of the customers of this industry use the stores as a one stop shop. Once again, each customer matters. After evaluating each segment of bargaining power of the buyer, we concluded that the bargaining power of the customers for the discount retail industry is relatively high. 4 Bargaining Power of the Suppliers In contrast to the bargaining power of the customer, the bargaining power of the suppliers is relatively low. The low switching costs, number of companies, and the number of substitute suppliers are factors that give very low bargaining power to the suppliers. The companies in the discount retail industry are very price sensitive because it caters to the low-income customer. The suppliers of products have to sell at the right price because companies are trying to keep the lowest cost possible. Switching Cost The switching cost is relatively low among suppliers.

It is important for a company in this industry to minimize cost as much as possible. The large number of suppliers that are available makes it easy for companies to switch to suppliers that have the lower costs. Suppliers have to compete with one another to supply to the companies in the industry. Their bargaining power is very low because the stores dictate who they will choose and it will always be the lowest cost supplier. Product Cost and Quality Suppliers have to focus on minimizing costs. Product quality is not at the forefront t because companies are not shopping for quality products, but they are looking for low cost products.

The suppliers have no choice but to focus on cutting costs. Number of Suppliers The number of suppliers in the discount retail industry is very large. The large number of supplier decreases the bargaining power of the supplier because of the number of alternatives for the customers. Each supplier has no choice, but to compete with each other and whoever is able to achieve the lowest price gets the deal. 25 Volume per Supplier The volume of purchases by the companies is moderate. The suppliers need to keep cost low in order for companies to consider them as a supplier.

If the supplier can’t supply the products at the right price set by the companies the company will look for other producers. The volume at which the companies will purchase at is more incentive for suppliers to keep cost low. In conclusion, the suppliers in the industry need to maintain low costs because of the bargaining power in the hands of the company. The number of suppliers available and the ease of switching from one to the other affect how much bargaining power each supplier is able to have; therefore, the bargaining power of suppliers is low.

Lastly, the five forces model is a tool used to value an industry and see how attractive it is. The model is divided into two categories, the degree of actual and potential competition, which talks about how the firms in the industry compete with each other and the strategies used in the industry in order to stay competitive. The second part is the bargaining power in the input and output markets, which talks about the bargaining power of suppliers and buyers. It focuses on the things they do in order to stay ahead of the competition. Value Chain Analysis

The value chain analysis discusses important strategies that a company needs to utilize in order to be a cost leader in the industry. The following paragraphs will go through each strategy and analyze effective ways a company can pursue in order to keep costs low. The following analysis will present information on how a discount retail company should compete in a highly competitive industry. After the value chain analysis is complete we will use the information to evaluate Dollar Generals performance in the discount retail industry. 26 Dollar General resides in a highly competitive discount retail industry.

Each company competes to provide basic commodities and service at a low price. In order to be successful, each competitor has adopted the business strategy of cost leadership. By implementing this strategy successfully, companies will be able to earn profits and gain greater market share. Efficient production In order for a company to be a cost leader in the discount retail industry, the company has to be efficient and strive to have low operational costs. Improving Technology helps to cut cost and increase efficiency with systems like inventory management tools and supply chain systems (Dollar General 10k).

Another way to be efficient is by maximizing trailer loads in order to cut down on the number of trips to be made and increase efficiency (family Dollar 10k) Simpler Product Design Since this is a discount retail industry, quality is not as an important factor therefore a company can sacrifice on using high quality raw materials and go for the generic products that cost much less. The companies need to use low cost products many of which rely on the supplier they choose. Efficient companies are able to get semi-decent quality products at a very low price.

Lower Input costs A company in the discount retail industry needs to keep input cost at a minimum. Companies can reduce the amount of input costs by managing leases, buildings, and warehouse in an efficient manner. Low-cost distribution Lower cost distribution is also very imperative in cutting costs. If a company has to hire a transporting company, warehouse space and labor that go along with it, they incur unnecessary costs. This factor alone makes it very 27 difficult for new entrants to survive in the industry.

The company needs to minimize these cost by using efficient, low-price means of distribution. Minimal Brand Image cost Companies in the discount retail industry need to have very little expenses in brand images. A company that spent money to keep its image up would be using unnecessary cost. In order for a company to be a cost leader, it must minimize its unnecessary expenses. Tight cost control The discount retail industry mainly deals with the same types of products therefore making it important for a company to strive to be a price leader.

Since the industry deals in discounted products you can only lower the price so much, thus the company has to focus of having lower operational cost in order to be able to have the everyday low prices. Having long relationships with suppliers, is a good way of cutting cost because it enables a company to have a steady supply of merchandise at a discount. This not only makes it hard for new entrants, but it also cuts costs. Firm Competitive Advantage Analysis In this section, we will discuss how Dollar General has performed using the value chain analysis in the previous section.

Each section of the value chain presented above will be presented relative to our company. We will discuss how the company has performed historically, currently, and how they are projected to perform in the future. The competitive advantage analysis is important because it shows how well Dollar General is utilizing cost leadership in a very competitive industry. Each Section below will discuss important information that will help value the company relative to other companies in the industry. 28 Efficient production Dollar General has done a decent job to utilize the cost leadership strategies.

It has focused on efficient low cost production and distribution. They have their own warehouse and trucks to supply stores to minimize transportation costs. Dollar General will only use suppliers that can maintain a low cost on products and delivery. They have diversified their supplier chain to minimize costs which is due to 14% coming from Proctor & Gamble, 16% from imports, and the maintaining from different suppliers. They have located every store in cities that are 20,000 or less populated to cater to their target market. Currently, Dollar General is trying to improve the efficiency of its stores.

They are closing a few stores in less productive areas and spending money to remodel, advertise and develop a more efficient means of distribution. They hope to improve the quality of existing stores to maintain there slightly higher position in the industry. Simpler product design As a leader in the industry, Dollar General provides basic commodities at a low price. A sacrifice in the quality must be made to achieve these low prices. As a result, products that are offered do not carry a brand image and has no research and development costs.

This is a key to be competitive in the industry and Dollar General will continue to provide simple product designs throughout the year to accommodate the demand for low cost merchandise Lower Input Costs Dollar general historically has minimized input cost spending very little on capital improvement costs. They have tried to minimize the cost of owning buildings by leasing out most of their buildings. They have had a system that has focused on minimizing input-costs. 29 Currently, Dollar general has spent more money trying to remodel worn down buildings and increase sales space.

They have also invested a lot of money into improving their distribution system to increase efficiency. They have also incurred costs to shut down non-producing stores. Dollar General hopes that these improvements will increase sales and lower costs in the future. We believe that these expenses will have a negative effect on the company’s value currently, but could improve the company’s value in the future. Low-cost Distribution Dollar General owns six of there nine distribution centers across the U. S. and have their own trucking service.

This helps minimize the cost of contracting to other trucking companies. The distribution centers, being located in central hub areas, cut costs of transportation to Dollar General stores. 99 Cents Only lease to trucking companies which adds to cost. We believe because they are cutting distribution costs, they have the upper-hand against the competitors in the industry. Minimal Brand Image Cost Dollar General owns several trademarks pertaining to their company and subsidiaries. Brand image is not a high cost for Dollar General; they invest when needed in their image to protect their identity in the industry.

Tight Cost Control As a leader in the discount retail industry, Dollar General has to continually focus on improving their tight cost controls. This will help sustain low prices that drive the success of the stores. Recent improvements in the point of sale system allow the store to accept gift cards which will bring in a new source of revenue. An additional upgrade of software applications was added to monitor inventory in each store. This allows management to efficiently manage 30 their in store stocks and improve turnover.

These investments made will help Dollar General operate their stores more efficiently and will in turn reduce their operating costs. Conclusion In our analysis, we have concluded that Dollar General is doing a decent job in utilizing cost leadership strategies. They are striving to be the cost leader in their industry. They have taken on many projects to improve quality, efficiency, and production that could help lower overall costs in the future. The company has also spent only what it needs on brand imaging keeping costs low.

Dollar General owns most of there distribution centers and trucks minimizing contracting fees. We believe that Dollar General recent costs to improve their stores and improve production may decrease the value of the firm in the short-run compared to competitors; however, the improvements to the stores quality and efficiency could improve the company overall in the future. Other then the recent costs to improve current stores, Dollar general is utilizing effective cost leadership strategies. 31 Accounting analysis Within a company’s financial reports lies crucial information to determine the valuation of its performance.

An accounting analysis is used to assess the financial disclosures and conclude if its accounting practices support the structure of the industry in which the company resides in. This examination is important because the financial reports released have managerial estimates and judgments that affect the outcome. The first step is to identify the key accounting policies of the company. Next, the analyst has to assess the degree of potential accounting flexibility, or how able the company is to manipulate numbers and still follow the rules outlined by GAAP.

An evaluation of the actual accounting strategy is performed next to decide how conservatively or aggressively the flexibility is used to manipulate financial reports. The next step is to review the quality of information disclosed in the statements. From the evaluation, there could be some “red flags” that signal discrepancies in the reported information. The figures need further investigation to determine its validity. The last step in the analysis involves undoing the accounting distortions. The following is the assessment of Dollar General’s accounting practices. 32 Key Accounting Policies

Dollar General’s main Key Success Factors focuses on cost leadership. Dollar General uses slightly aggressive accounting policies and is only partially clear in stating how they record transactions in their footnotes; however the only balance sheets they give are consolidated so you cannot actually see the individual events being recorded. Dollar General record vendors rebates as a reduction of merchandise purchases costs and are recognized in the statement of operations at the time the goods are sold (Dollar General 10-K). This reduces their overall costs and allocates the extra cash to the correct account.

Dollar General does not have any Goodwill recorded, which can be used to inflate a company’s value since it is an intangible asset. Dollar General records store opening costs as expenses as they occur (Dollar General 10-K p56) rather than capitalizing them. This is the appropriate and honest way to account for these costs. Another way Dollar General maintains their cost leadership is through the reporting of building leases. In terms of the types of leases Dollar General has, they have both operating and capital leases. Dollar General leases the majority of its stores on a short term of 3-5 years.

These leases include multiple renewing options for the managers to decide on a basis of performance and sales. In addition, there are store that are built-to-suit where the leases range from 7-10 years. Among all the stores that Dollar General leases, half are operating on a contingent rent based on sales. If a store is performing well, the 33 likelihood of it renewing its lease is high. This conditional rent expense is recognized when sales goals are met or probable. For the remaining stores, rent expense is recognized on a straight line basis over the term of the lease.

Also, if it is stated in the lease that rent will increase annually at a fixed rate, rent expense is recognized on a straight line basis while the increased amount will be recorded as deferred rent. Another accounting strategy that Dollar General uses to its benefit is to record tenant allowances as deferred incentive rent. This in turn can be amortized to reduce rent expense over the term of the lease. Industry Inventory 2002-2006 $1,600,000,000 $1,400,000,000 $1,200,000,000 $1,000,000,000 $800,000,000 $600,000,000 $400,000,000 $200,000,000 $0 2002 2003 2004 2005 2006 Dollar General Family Dollar, Inc.

Dollar Tree, Inc. Fred's, Inc. 34 Degrees of accounting flexibility Managers at Dollar General may have latitude with their reporting methods within their financial statements, but they must comply with industry standards of GAAP. This set of regulations is the framework for which all companies must use in the preparation of financial statements. Accounting manipulation within the guidelines of GAAP may produce or conceal important information that would work in favor the company. Dollar General uses this flexibility in reporting their key accounting policies of leases and vendor rebates.

As previously stated, Dollar General accounts for its leases under both capital and operating. The accounting flexibility in balancing between these two methods allows them to determine how much is disclosed on their financial statements from operations. The benefit of operating leases is that it allows Dollar General to report its lease expenses as an operating expense leaving it off the balance sheet. This in turns reduces the liability of the company. Conversely, the amounts that are reported under capital leases are recognized immediately on the balance sheet.

The following table shows how the leases are currently reported for Dollar General. They are discounted at an effective interest rate of 6. 7%. 35 Future Minimum Payments of leases *In thousands 2007 2008 2009 2010 2011 Thereafter Total minimum payments Discount rate 6. 7% (Dollar General 2006 10-K) Capital Leases * 7,658 5,440 2,082 599 599 7,036 23,414 Operating Leases * 304,567 254,087 206,369 169,454 139,841 415,263 1,489,581 It is evident that the majority of Dollar General’s leasing costs are operating rather than capital leases.

The large amount of operating leases is crucial to the stores success in the discount retail industry. A stores ability to bring in revenues and earn profits is the key to remain in business. The flexibility in the terms of the lease allows managers to assess the profits earned for a store and to determine if they can afford to remain in business. The ability of Dollar General to spend a large amount of money on operating leases allows them to keep that same amount off the balance sheet as a liability. This reduces the amount of debt reported on the balance sheet working in favor of the company.

Another method of accounting flexibility shown by Dollar General is the way vendor rebates are handled on the financial statements. Vendor rebates received are accounted for as a reduction in the purchase cost of the merchandise. This is recognized in the statement of operations at time the 36 commodities are sold. Cash considerations from the vendor may in turn offset some general, selling and administrative (GS) expenses related to the sale of the merchandise. Depending on the amount of rebates Dollar General realizes, it reduces operating expenses showing greater income.

This rebate is limited and will only offset the costs associated with the GS expenses incurred of the merchandise. Consequently, this is an incentive for Dollar General to claim as many vendor rebates as they can. However, while the footnotes are very clear on how they do this the actual numbers are not given on the balance sheet; therefore, it is unclear just how much this affects their financials. Accounting Strategy Dollar General uses slightly aggressive methods when reporting their financials. Dollar General disclosed quiet a bit of information in their footnotes, but supporting data was hard to interpret.

We feel that their slightly aggressive accounting policies made it difficult to go through their financial statements. Dollar General has both operating and capital leases. The majority of capital leases have terms between 3 to 5 years with renewable options. There are built-to-suit arrangements with landlords that have terms of 7 to 10 year and multiple renewal options on some of the leases. Operating leases are treated as rent expense rather than being liabilities therefore it does not give a true picture of total liabilities on the balance sheet. Improvements of leased properties are 37 amortized over the shorter of the life of the applicable lease term or the estimated useful life of the asset” (Dollar General 10k) Dollar Tree and 99 Cents Only also have similar accounting strategies, concluding that this could be an industry trend. The recording of depreciation, benefit, and goodwill are a few of the minor things Dollar General has done to stay a head of the competition in a cost leadership industry. Dollar General depreciates property, plant, and equipment using the straight-line method.

A benefit to using the straight-line method is at the end of the life term of the asset the company pays the salvage value of the asset opposed to the fair value, decreasing the expenses related to these assets and further helping the bottom line. Employee benefit plans are expensed on a year to year basis rather than being liabilities to the firm. Dollar General does not have any goodwill on the books which we consider a very conservative accounting strategy. This indicates that they do not inflate their numbers for investors.

Since Dollar General is in a low concentrated industry, they strive to provide merchandise at everyday low prices thus it is necessary to keep prices as close to marginal cost as possible. Dollar General has achieved this by categorizing their products into four distinct areas; highly consumable, home products, seasonal, and basic clothing. This has made it easy for management to track where most sales come from and improve where they need to, as shown below in the graph. 38 Product Sales 70. 00% 60. 00% 50. 00% 40. 00% 30. 00% 20. 00% 10. 00% 0. 0% 2006 2005 2004 Basic Clothing Highly consumable Home products Seasonal Quality of Disclosure Qualitative The quality of disclosure is very important to investors and analysts. The 10K is usually the best source of information when looking at a company’s well being. However not many company’s do a good job in disclosing a lot of important information in their 10K. Dollar General does a good job in disclosing a lot of important information in their 10K. They not only focus on showing only the elements in which they excel in but also areas that they are not doing too well in. For example The gross 39 rofit rate declined in 2006 from 28. 7% to 25. 8%. They farther go on to explain the reason for the decline which resulted due to significant increase in markdowns activity as a percentage of sales, and store closing initiatives. The only downfall is that they do not disclose how they will go about correcting the problem; we thought that would be critical information for investors to know, otherwise they may think that gross profit will continue to fall. Dollar General’s 10K is loaded with good information. They go into detail talking about the company performance measures, the results of operations.

This manager’s overview helps an investor know exactly how the firm is doing without doing too much research. The footnotes on the financial statements are informative and explain what on the financial statements. For example it states how the capital leases and operating leases are handled and what percentage they cover. In February 2006 the gross amount of property and equipment recorded was 85. 1million and 150. 2 million as of February 2007. This gives a true picture of the fixed assets that Dollar General has. Quantitative 40

The measure of the quantitative quality of disclosure involves two sets of ratios, revenue diagnostics and expense diagnostics. We will use the data from the ratios in our valuation of the firm. The data we collect from this section will indicate how well Dollar General has reported their financial information and potentially identify any red flags. Sales Manipulation Diagnostics We calculated five core sales manipulation or revenue diagnostics. We found these by dividing a company’s net sales by the following denominators: cash from sales, net accounts receivable, unearned revenues, warranty liabilities, and inventory.

When analyzing a company, the ratios are calculated over time and compared to those of the competitors in the same industry. The ratios indicate how well the company is reporting their revenues. 41 Net Sales/Cash from Sales 1. 2 1 0. 8 0. 6 0. 4 0. 2 0 Dollar General Dollar Tree Family Dollar Fred's Inc. 2002 1 1 1 1 2003 1 1 1 1 2004 1 1 1 1 2005 1 1 1 1 2006 1 1 1 1 Net sales/Cash from sales The discount retail industry is cash to sales basis industry. A cash to sale industry is one in which every sale is accompanied by payment, therefore deferred payments do not exist.

Thus, the ratio of net sales/ cash from sales is 1 all across the board. Net sales/Net accounts receivable Since the discount retail industry is cash to sale industry they do not have any account receivables, thus the ratio does not affect the industry. 42 Net sales/Unearned revenues Unearned revenue is when a company offers a service or product and does not receive immediate payment until later. The discount retail industry does not have credit sales because everything is on a cash to sale basis, therefore this ratio does not apply to the industry. Net sales/Warranty liabilities

Warranty is when a company guarantees their products of by offering to replace or repair the product if something goes wrong within a specified amount of time. So a company that has warranty liabilities would have high sales but low revenues. The discount retail industry does not offer warranties on their products so again this ratio does not apply to the industry. Net Sales/Inventory 8 6 4 2 0 Dollar General Dollar Tree Family Dollar Fred's Inc. 2002 5. 43 5. 37 5. 43 5. 7 2003 5. 94 5. 33 5. 56 5. 43 2004 5. 57 5. 08 5. 39 5. 24 2005 5. 82 5. 89 4. 42 5. 23 2006 6. 4 6. 56 6. 16 5. 79 43 Net Sales/Inventory

The net sales/ inventory ratio is important because it tells us the amount of inventory we have in relation to our sales. It asks the question; do reported sales and inventory match each other in a believable way? If this number starts increasing rapidly and/or unexplained it raises a red flag because it would imply that while sales are growing, inventory is decreasing. If it is increasing like this, the company must be recording things wrong, or perhaps channel stuffing. We have found the industry as a whole to be pretty consistent the past five years and have not found any potential red flags for Dollar General.

Core Expense Manipulation Diagnostics There are six core expense manipulation diagnostics. These ratios are found in a variety of ways, but they all relate to a company’s expenses and are also used to identify potential red flags. 44 Asset Turnover (sales/assets) 4 3 2 1 0 Dollar General Dollar Tree Family Dollar Fred's Inc. 2002 2. 61 1. 81 2. 37 3. 19 2003 2. 62 1. 86 2. 39 3. 14 2004 2. 7 1. 74 2. 37 3. 1 2005 2. 88 1. 89 2. 42 3. 19 2006 3. 02 2. 12 2. 53 3. 43 Asset Turnover – Net Sales/Total Assets The asset turnover tells us how much sales our assets can generate.

If this number begins declining, it implies that sales are decreasing while assets are increasing, we must wonder if the company has the appropriate amount of assets to generate the desired sales. Through off-balance sheet accounting, reporting operating leases, as opposed to capital leases, a company can show fewer assets on the balance sheet and in turn have a higher asset turnover ratio. Overall the industry is quite consistent and Dollar General has remained consistent with the industry standards and show no potential red flags. 45 CFFO/OI 3. 00 2. 00 1. 00 0. 00 -1. 0 Dollar General Dollar Tree Family Dollar Fred's Inc. 2002 0. 93 2. 77 0. 23 1. 02 2003 1. 01 0. 83 -0. 33 0. 72 2004 0. 70 0. 94 -0. 11 0. 54 2005 0. 98 1. 28 0. 44 1. 21 2006 1. 63 1. 33 0. 52 0. 86 Changes in CFFO/OI This ratio is found by dividing the cash flow from operations by the operating income and tells us whether or not the income is being supported by the cash flows. If this number is dropping without explanation it raises a red flag because cash flows cannot be increasing while income decreases. In this situation, expenses may not be recorded or revenues may be overstated.

With the exception of Dollar Tree in 2002, the industry has remained quite consistent. Seeing that Dollar General has remained consistent with the trends and has not fluctuated too much over the past five years there are no potential red flags to investigate. 46 CFFO/NOA 1 0. 5 0 -0. 5 -1 Dollar General Dollar Tree Family Dollar Fred's Inc. 2002 0. 42 -0. 5 0. 59 0. 34 2003 0. 54 0. 38 0. 36 0. 49 2004 0. 36 0. 4 0. 41 0. 28 2005 0. 47 0. 54 0. 29 0. 15 2006 0. 33 0. 58 0. 42 0. 35 Changes in CFFO/NOA This ratio is found by dividing the changes in a company’s cash flow from operations from the previous year by its net operating assets.

If this ratio is dropping without explanation it raises a red flag because in order for this to happen the assets are most likely being overstated to increase a company’s value. Overall the industry has remained steady with the exception of Fred’s Inc. , who had a negative cash flow in 2002, but has since recovered. The only concern we have is that Dollar General’s ratio slightly dropped in 2004 and 2006. However, this drop can be explained by an increase in net operating assets due to recent renovations and added equipment, such as freezers. Overall, there are no potential red flags in this area. 7 Accruals/ Changes in SalesThis ratio is found by taking the total accruals for the year and dividing them by the difference in the sales of the current year and the previous year. Total accruals are found by subtracting the net cash flow from operations from the net income. This measure is a way to measure the returns the company is getting form operating assets. Pension Expense/ SG&A Dollar General has a defined contribution plan in place. The defined contribution plan leaves the liability on the hands of the employee and the obligation of the employer is merely a small percent of the plan.

They do not need to recognize any Pension Expense through out the year only when it is incurred. No ratios needed to be calculated. Other Employment Expenses/ SG&A Other employment expense includes medical insurance and other certain benefit programs. Due to the nature of the discount retail Industry Company’s offer little to no benefit packages. Most employees are privately insured. No Ratios need to be calculated. 48 Identifying Potential “Red Flags” The quantitative characteristics of a firms accounting disclosure can be analyzed to signal distortions in the accounting.

In this section, we will analyze the discount retail industry and compare Dollar General with the rest of the industry. The main purpose of this section is to find potential deviations from the norm that could potentially distort the companies accounting records. We will be assessing several ratios and evaluating the amount of disclosure Dollar General has presented. Identifying potential distortions in the accounting is important because a clearer view of the company can be presented once the distortions are fixed. The following ratios will help compare and signal any deviations Dollar General may have ompared with the rest of the company. * The fact that Fred’s Inc. fiscal year ends in August while every other company year ends in March or May was taken into consideration in the comparability in our analysis. 49 Undoing Accounting Distortions Accounting distortions occur when a company unknowingly or knowingly reports numbers that are misleading. This allows the managers to influence the outcome of the financial statements to show better performance. The simplistic nature of the discount retail industry enables Dollar General to report their financials rather straight forward without accounting alterations to show better value.

This industry is driven by high volume sales of low cost items. Revenues and profitability determine if store operating leases will be renewed to cut loses. After analyzing Dollar General’s financial statements and determining the level of sales and expense manipulation, we did find a potential red flag from the CFFO/NOA ratio. Dollar General’s expense diagnostics raise a red flag with their accounting reporting. The cash flow from operations to net operating asset ratio shows us the proportion of the operation cash flows from the property, plant, and equipment owned.

In comparison to its competitors, the ratio is on average except for 2005 when the ratio dropped for Dollar General. The increase in the net operating assets is a result from the growth of the company in the past years. Dollar General has been acquiring new assets to expand their departments to meet the demand of the discount retail industry. This information was disclosed on the Dollar General 10-K allowing us to match the increase in assets. 50 Dollar General has used accounting flexibility to record a large portion of their leases as operating leases.

In the next table we have converted the current operating lease payments into capital leases to show the differences of approximately $1. 2 billion in avoided liabilities. Operating Lease Conversion Capital Leases 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Reported Capital Leases $23,414. 00* *In Thousands Along with the avoided liabilities, the reporting of operating leases leads to understated expenses. This next table shows the interest expense and depreciation expense being avoided over the next ten years, using the 6. 7% rate found in Dollar General’s 10-K. 7,658. 00 $5,440. 00 $2,082. 00 $599. 00 $599. 00 $1,407. 20 $1,407. 20 $1,407. 20 $1,407. 20 $1,407. 20 1 2 3 4 5 6 7 8 9 10 Total Operating Leases $1,489,581. 00* Total Capital Lease $1,158,572. 63* Operating leases $304,567. 00 $254,087. 00 $206,369. 00 $169,454. 00 $139,841. 00 $83,052. 60 $83,052. 60 $83,052. 60 $83,052. 60 $83,052. 60 PV Factor 0. 937 0. 878 0. 823 0. 772 0. 723 0. 678 0. 635 0. 595 0. 558 0. 523 PV $285,442. 36 $223,179. 14 $169,883. 50 $130,735. 69 $101,114. 26 $56,281. 64 $52,747. 55 $49,435. 38 $46,331. 19 $43,421. 92 51

Discount Rate 0. 067 Term Payment 1,158,573 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1,073,522 982,774 885,945 782,629 672,390 554,766 429,260 295,346 152,460 0 162,675 162,675 162,675 162,675 162,675 162,675 162,675 162,675 162,675 162,675 77,624 71,926 65,846 59,358 52,436 45,050 37,169 28,760 19,788 10,215 85,050 90,749 96,829 103,316 110,238 117,624 125,505 133,914 142,886 152,460 $115,857 $115,857 $115,857 $115,857 $115,857 $115,857 $115,857 $115,857 $115,857 $115,857 10 Straight Line Interest Principle Depreciation *All Numbers in thousands. *The affects of the capitalization of these leases on the balance sheet can be seen in the appendix. 52 Financial Analysis At this part of the valuation, it is important to tie together all the previous analysis. This gives a true sense of how the company is operating in the industry and where it is heading in the future. First we identified the business strategy and the five success factors. This tells us how the company plans to thrive in the discount retail industry. From the accounting analysis, we will be able to determine from past financial statements how the company will fund future growth.

To properly forecast the future of Dollar General and assess their development, it is essential to calculate the liquidity, profitability, and capital structure ratios. Liquidity ratios refer to the amount of cash or equivalence on hand for operations. Profitability ratios determine the amount of profits based on operations. Capital structure ratios determine the cost of debt it takes to operate the business. These ratios will help determine how well the company is performing from a business strategy perspective to its competitors.

Trend & Cross Sectional Analysis The analyses of a firm’s financial statements tell about its liquidity, profitability, and capital structure. Know these things when analyzing a firm is important in order to evaluate the firm and its performance. The liquidity ratios tell us how much of the firm’s assets is cash or cash-equivalents and in turn tell how timely they will be able to meet their current obligations. The profitability ratios tell how profitable a firm is based on its efficiency and rate of return.

Finally, the capital structure ratios tell how the firm is financed and how much of their income is being used to pay interest versus how much is being used to pay the principal. 53 Financial Ratio Analysis Several ratios can be performed to evaluate the financial position of a firm. Each ratio illustrates a different aspect of the company’s well being for example how quick assets can be converted in to cash to cover liabilities. The ratios can also tell how efficient the company is in the industry. Each ratio will be computed to reflect a 5 year trend of each company.

Three main areas that will be focused on in the following section are liquidity ratios, profitability ratios, and capital structure ratios. These ratios will be used to asses Dollar Generals position in the discount retail industry. Each ratio will dissect the financial statements of Dollar General and their competitors. From these ratios, the value of the past performance can be determined as well as trends that can help in forecasting the future trends of the company. Liquidity Ratios Liquidity ratios apply to the amount of cash equivalent assets on hand for a firm and the ability to convert these into funds for future liabilities.

The liquidity ratio will be broken down into two different types of ratios. The first two line it

Cite this Page

Dollar General Analysis. (2017, Dec 31). Retrieved from https://phdessay.com/dollar-general-analysis/

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

plagiarism ruin image

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Save time and let our verified experts help you.

Hire writer