Essay on Notes On The Dollar Tree 's Roe

1059 Words null Page
RNOA (operating return) is often broken down into its component parts (net operating profit margin and net operating asset turnover). Easton, et al. (year) explain that, “net operating profit margin (NOPM) reveals how much operating profit the company earns from each dollar of sales. Net operating asset turnover (NOAT) measures the productivity of the company’s net operating assets” (p. 3-13 and 3-14). RNOA = NOPM * NOAT
Dollar Tree and Dollar General’s net operating profit margins are similar in all years analyzed (7.62% and 5.93%, respectively in 2015). Dollar Tree earns about $0.0762 per dollar of sales; Dollar General earns about $0.0593 per dollar of sales. The two companies have markedly different NOAT ratios, however. Dollar Tree had a NOAT of 5.13 in 2015 while Dollar General had a NOAT of 2.43. This difference in NOAT explains why Dollar Tree’s ROE is double that of Dollar Generals.
Credit Demand and Other Useful Information All numbers in this section are in thousands (to be consistent with the financial statements).
Dollar Tree: The demand for credit at Dollar Tree is extremely high. Since 2014, Dollar Tree has been attempting to acquire Family Dollar. Dollar Tree successfully acquired Family Dollar in 2015. Although the calculations in this analysis do not reflect the new debt that Dollar Tree has taken on to fund the acquisition, it is very important to understand. Prior to the acquisition, Dollar Tree’s debt seemed pretty standard when compared…

Related Documents