Dollar General: Operating And Non-Operating Liabilities

Operating and Non-Operating Liabilities Operating liabilities arise from ordinary operations and provide a less expensive source of financing for companies. Attachment 32 (page XXX) shows the operating and non-operating liabilities for Dollar Tree and Dollar General. Dollar Tree’s operating liabilities as a percentage of total liabilities were 57.52% in the fiscal year 2014, 51.92% in fiscal year 2013, 74.99% in fiscal year 2012, and 73.02% in fiscal year 2011. The percentages have decreased over the four year period and are getting closer to a “normal” range for most companies. Dollar General’s operating liabilities as a percentage of total liabilities were 50.30% in fiscal year 2014, 48.49% in fiscal year 2013, 48.49% in fiscal year

A useful financial ratio to consider is the accounts payable (A/P) turnover ratio, which is a “short-term liquidity measure used to quantify the rate at which a company pays off its suppliers” (Investopedia, 2016). The results for both companies are located in Attachment 32 (page XXX). In fiscal year 2014, Dollar Tree had an A/P turnover of 13.46 times, whereas Dollar General had an A/P turnover of 9.80 times. Dollar General’s A/P ratio is generally considered to be better because accounts payable represent a “free” short-term loan from the

Dollar Tree uses senior notes (5.25% and 5.75%), variable-rate demand revenue bonds, promissory notes, letters of credit, bank debt, and surety bonds. As noted previously, Dollar Tree’s debt is placed mostly with institutional buyers (SEC rule 144A). Dollar General uses senior unsecured credit facilities (term and revolving), senior notes (4.125%, 3.25%, and 1.875%), capital lease obligations, bank debt, and letters of credit. Dollar General’s debt is publically traded. Dollar Tree’s average interest rate on its debt was 2.6775%; Dollar General’s average interest rate on its debt was