Dollar General Case
There can be a number of reasons for a company to go public or private. There are benefits, as well as disadvantages that go along with either course of action (Exhibit 1 for details). When firms decide to go private, they are no longer listed on any stock exchange market. The pressure of keeping accounting regularity and reporting to the public is no longer an issue. Instead, firms can be more flexible to reorganize the business profile as well as the management team. In many cases, shareholders and board members receive very rewarding financial benefits from this transaction. However, in some situations, public firms do not have a choice in the matter, as is the case in a “hostile takeover”.
In assessing Dollar General’s performance, we first must conduct an internal comparison, in which the Statement of Income shows both production and period cost had increased greatly which resulted in lower income; meanwhile, Ratio Analysis also points out relatively lower growth in revenues and profit margin. For external comparison, the Income Statement Comparison chart proves (Although DG still lead in net sales) its growth in sales dropped 43.3%, while its peers had significant growth. Refer to ratios analysis in Exhibit 2.
In the fiscal year ending Feb. 2, 2007, there was a performance decline caused by 1) ineffective inventory management, 2) real estate profile, and 3) increased SG&A. Inventory amassed due to unsold seasonal items and the store network (over 8000 stores) experienced problems due to its sheer size. Management took challenging steps to resolve #1 and #2 by offering markdown sales and restructuring the shops network. Even so, the profit loss from the markdowns, the additional depreciation expense caused by the store closures and rising SG&A costs of opening new stores all led to a lower net income (Exhibit 2).
Mrs. Sadayo’s decision on whether or not to sell her shares depends on two major factors 1) Her financial goals in respect to KKR’s
In assessing Dollar General’s performance, we first must conduct an internal comparison, in which the Statement of Income shows both production and period cost had increased greatly which resulted in lower income; meanwhile, Ratio Analysis also points out relatively lower growth in revenues and profit margin. For external comparison, the Income Statement Comparison chart proves (Although DG still lead in net sales) its growth in sales dropped 43.3%, while its peers had significant growth. Refer to ratios analysis in Exhibit 2.
In the fiscal year ending Feb. 2, 2007, there was a performance decline caused by 1) ineffective inventory management, 2) real estate profile, and 3) increased SG&A. Inventory amassed due to unsold seasonal items and the store network (over 8000 stores) experienced problems due to its sheer size. Management took challenging steps to resolve #1 and #2 by offering markdown sales and restructuring the shops network. Even so, the profit loss from the markdowns, the additional depreciation expense caused by the store closures and rising SG&A costs of opening new stores all led to a lower net income (Exhibit 2).
Mrs. Sadayo’s decision on whether or not to sell her shares depends on two major factors 1) Her financial goals in respect to KKR’s