Dollar General Analysis Essay

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Pages: 102
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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……………………………………….15 Channels of Distribution and Relationships…………..16 Legal Barriers………………………………………………17

Threat of Substitute products…………………………….17
Buyer’s willingness to …show more content…
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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 alert 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.

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Ratio Analysis, Forecast Financials, & Cost of Capital Estimation
Ratio analysis is done to evaluate a company and to find
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