Final Submission: Dollar Tree Strategy and Change Management Plan

Running head: FINANCIAL ANALYSIS 1

FINANCIAL ANALYSIS 2

Dollar Tree Analysis of Financial Information

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Dollar Tree Analysis of Financial Information

	Most Current Year ($ millions)	% Chg (+/–)	Previous Year ($ millions)
Current Assets	5609	+9.95	5051
Total Assets	21721	+4.719	20696
Current Liabilities	4177	+10.701	3730
Total Debt	14003	+4.235	13410
Sales/Revenue	26321	+3.085	25509
Cost of Goods Sold	18594	+4.695	17721
Inventory	4367	+21.525	3427
Net Income/Loss	1328	-1.054	1342

Increasing and Decreasing Items

Current Assets – A positive change in current assets is a good sign since assets constitute the value of the organization (Barone, 2022). Current assets are short-term and projected to be spent within a year. A positive shift suggests that Dollar Tree is keeping its short-term economic benefit hence able to satisfy its short term obligations as they fall due.

Total Assets - A positive increase in total assets is analogous to a positive change in current assets. This positive change indicates that the company is sensibly using its resources, which is an encouraging sign (Barone, 2022). In addition, this is a good omen for Dollar Tree.

Current Liabilities - A positive shift in current obligations is often regarded as a negative development. It indicates that the entity's short-term financial commitments are becoming more onerous to meet. This is particularly detrimental if a rise in liabilities occurs simultaneously as a rise in assets.

Debt - A positive change in total debt indicates that the amount of money owed by the entity has increased. This is a negative development since it has an impact on business partnerships. Someone who is concerned about the possibility of a firm's bankruptcy would not want to invest in a firm with a lot of debt.

Sales/Revenue - The presence of a positive change in income is beneficial since it indicates that earnings are rising.

Cost of Goods Sold - Having a positive shift in the cost of items sold indicates that it is more expensive to manufacture things. This is detrimental to Dollar Tree since it lowers the likelihood of it making a profit.

Inventory- The presence of a positive shift in inventory implies that the firm is working to turn its inventory into cash as rapidly as it can (Amanda, 2019). This is beneficial since it might result in the organization experiencing lower expenditures for storage, maintenance and insurance.

Net income/loss- When the net income/loss account shows a negative change, it indicates that the entity's spending is outpacing the entity's earnings. This is detrimental to the company since it results in losses.

Calculation of Financial Ratios

· Current Ratio

Current ratio =current assets/current liabilities

= 5609 / 4177 = 1.342

A current ratio of 1.342 is good for the Dollar Tree Company. This is due to the fact that it demonstrates that the corporation has more than enough cash to pay its obligations while also utilizing its resources efficiently (Amanda, 2019).

· Debt to Asset Ratio (Debt Ratio)

Debt to asset ratio= total debt/ total assets

= 14003/ 21721 = 0.645

A debt ratio of 0.645 indicates that Dollar Tree has a higher amount of assets than debts. This is beneficial to the financial health of the organization. Dollar Tree is not dependent on debt to fund its operations, which is beneficial to the firm's long-term success.

· Inventory Turnover

○Inventory Turnover

Inventory turnover = cost of goods sold/average inventory

= $ 18594/3897 =

An inventory turnover ratio of 4.771 implies that Dollar Tree is selling its total inventory 4.771 times in annually. Inventory turnover ratios of between five and ten are considered to be satisfactory (Amanda, 2019). A high turnover rate is a positive indicator of a company's financial health. Dollar Tree must order items in smaller amounts and at more regular intervals so as  to boost turnover.

· Return on Sales (Profit Margin)

Return on Sales (Profit Margin)

Net profit margin = net income/sales

= 1328/26321 = 0.050 = 5%

 A profit margin of five percent is considered low, which is a terrible sign for the financial viability of Dollar Tree. In order to manufacture its items, Dollar Tree spends more money than it earns from sales of those products. If Dollar Tree continues to operate with a low net profit margin, the company will eventually go out of business.

Summary and potential problem areas

A look at Dollar Tree's financials shows that the company is in serious difficulties. Despite the fact that Dollar Tree currently has adequate assets to meet its liabilities, the company is spending more on the selling costs of its items than it is earning from the sales of its products, resulting in a low profit margin. Dollar Tree will ultimately go bankrupt if the company's financial situation does not improve. A strategy for Dollar Tree to lower production costs while simultaneously selling more products is required before the company can start earning a profit. The fact that Dollar Tree has seen an increase in revenue is a positive indication for the company. If Dollar Tree can find a means to minimize production costs, they will be able to boost their positive net profit margin. Dollar Tree is now in an average financial situation, but they are in a place to turn things around and put themselves in a better financial position in the future.

References

Amanda, R. (2019). The Impact Of Cash Turnover, Receivable Turnover, Inventory Turnover, Current Ratio And Debt To Equity Ratio On Profitability. JOURNAL OF RESEARCH IN MANAGEMENT, 2(2). https://doi.org/10.32424/jorim.v2i2.66

Barone, A. (2022). What Is an Asset?. Investopedia. Retrieved 16 April 2022, from https://www.investopedia.com/terms/a/asset.asp.