Background Dollar Tree is a variety store that sells goods for 1.00 or less. This concept was first introduced over 60 years ago by K.R. Perry and Ben Franklin in Wards Corner, Norfolk, Virginia. The concept was passed on to Doug Perry (the son of K.R. Perry) and Ray Compton’s adventure into 1.00 retailing. These retail stores specialize in their own brand and provide a large selection of products. The stores offer soap, health and beauty aids, snacks, food, and pet products. Dollar Tree is also know for the awesome supply of party favors like balloons, streamers, decorations for any occasion, and season items. In addition, on July 28, 2014 announced that it would purchase Family Dollar for 8.4 billion dollars. This acquisition has been completed. …show more content…
The ratio is computed by the total liabilities divided by the total assets. So, for 2016 the company total liabilities are 2095.4/15091.2 which equals .14 and for 2015 861.6/3492.7 equals .25. The higher the ratio is the riskier the company financial solidity. Dollar Tree has a decrease in the ratio from 2015 to 2016, this shows that the company is not relying on credit as much. The finance department for this company has decreased the ratio to lower the risk. In 2016 the 14 percent of the company’s financing, stating that 86 percent is stockholder’s equity. This is a great strategy and it makes Dollar Tree finances look solid. The additional stores that the company is building and opening, will give an even larger stockholder’s equity. In addition, with the completion of the acquisition of the Family Dollar stores, after the expansion of the number of variety stores the company plans to open, Dollar Tree will be a great investment for its stockholders. “Creditors have to be paid regardless of have difficult a year the company may have had”. …show more content…
This would be the net income divided by the shareholder equity multiply by one hundred. Furthermore, the 2016 ROE for Dollar Tree is 282.4/4406.9 equals 6.41. The return on equity is not the average for its competitors. The competitors for Family Dollar and Dollar Tree are producing an ROE of 13% average. The owner’s equity is very important to be business and it is what keeps the shareholders within the investment. “Higher product variety and inventory levels at retail stores are typically associated with higher sales”. (Ton, 2010). The better the sales of the inventory the more shareholder equity the company has. A great return on the shareholders equity also make the company portfolio look solid and it also will have larger competitors looking into the company practice for different reasons. If the company wants to sale, or because in need of more cash flow, the ROE ratio shows the company is operating high for the shareholder’s equity. These stores Family Dollar and Dollar Tree have a good system in place to restock inventory and them also keep in stock the major products that consumer are looking for when coming to their