Dollar General Financial Analysis
This analysis contains references to years 2010 and 2009 for Dollar General Corporation, which represent fiscal years ended January 28, 2011 and January 29, 2010 respectively. The main issues which the company is concerned about are its ability to increase sales and profitability and reduce costs in the current economic situation; another issue is an ability to repay an extensive amount of long-term debt which increases its risks.
Analysis of profitability
The rate of return on assets for Dollar General for 2010 was 6.8% thus for each dollar the company used it earned $0.068. For 2009 ROA was 3.8%, so ROA increased between 2009 and 2010 fiscal years. Profit Margin for ROA is 4.8% for 2010 and for 2009 is 2.9%. We can see an increase in the profit margin for ROA ratio as well. Total Assets turnover ratio for 2010 is 1.4 and for 2009 is 1.3. The increase in ROA in 2010 resulted from increase in profit margin for ROA. Increase in ROA might be result of the decrease in cost of goods sold to sales percentage (numbers are taken from annual report) for almost 1 percent. That might be because Dollar General cut its costs for purchasing merchandise at a lower cost or it more actively sells its private line of products. Another reason might be that the company reduced its sales of home products and apparel and shifted more towards the sales of consumables. We can also see decrease in selling and administrative expenses to sales percentage this might have resulted from the increased demand on cheap products because of the economic situation. The assets turnover ratio might increased due to increase in sales especially the shift to consumables which have a higher turnover in comparison with apparel.
Long term Liquidity Risk
Liabilities to Asset ratio for 2010 is 57.4% and for 2009 61.5%. Long-Term Debt Ratio for 2010 is 34.4% and for 2009 is 38.4%. Debt Equity Ratio for 2010 is 81.1% and for 2009 is 100.3%. These numbers are pretty typical for public
Analysis of profitability
The rate of return on assets for Dollar General for 2010 was 6.8% thus for each dollar the company used it earned $0.068. For 2009 ROA was 3.8%, so ROA increased between 2009 and 2010 fiscal years. Profit Margin for ROA is 4.8% for 2010 and for 2009 is 2.9%. We can see an increase in the profit margin for ROA ratio as well. Total Assets turnover ratio for 2010 is 1.4 and for 2009 is 1.3. The increase in ROA in 2010 resulted from increase in profit margin for ROA. Increase in ROA might be result of the decrease in cost of goods sold to sales percentage (numbers are taken from annual report) for almost 1 percent. That might be because Dollar General cut its costs for purchasing merchandise at a lower cost or it more actively sells its private line of products. Another reason might be that the company reduced its sales of home products and apparel and shifted more towards the sales of consumables. We can also see decrease in selling and administrative expenses to sales percentage this might have resulted from the increased demand on cheap products because of the economic situation. The assets turnover ratio might increased due to increase in sales especially the shift to consumables which have a higher turnover in comparison with apparel.
Long term Liquidity Risk
Liabilities to Asset ratio for 2010 is 57.4% and for 2009 61.5%. Long-Term Debt Ratio for 2010 is 34.4% and for 2009 is 38.4%. Debt Equity Ratio for 2010 is 81.1% and for 2009 is 100.3%. These numbers are pretty typical for public