Name: Part 1 Financial Analysis Case relates to the textbook Module 1 including Appendix 1A and 1B, and Module 2. Make sure you have read the instructions for Part 1 and use the instructions as a guide as you answer the requirements for Part 1 on this template. Requirements: Upload your completed Part 1 template by clicking on the Part 1 Financial Analysis Case link. Enter you name on page 1 in area provided above. Please save your file with the initial of your first name and your last name. 1. Direct link, URL, to 10-K report for Dollar Tree, Inc. and Target State Corporation incorporate d Dollar Tree, https://www.sec.gov/Archives/edgar/data/935703/00009357031900 Inc. for 0024/dltr-2019x02x02x10k.htm Virginia fiscal year ending February 2, 2019 Target https://www.sec.gov/Archives/edgar/data/27419/000002741919000 Corporation 006/tgt-20190202x10k.htm Minnesota for fiscal year ending February 2, 2019 2. 1 Dollar Tree, Inc. for Target Corporation for fiscal year ending fiscal year ending February 2, 2019 February 2, 2019 Summarize Dollar Tree Inc. is the The Company was incorporated in 1902 and company’s leading operator of the offers its customers everyday essentials and business discount variety stores. fashionable, differentiated merchandise at operations The company believes discounted prices. in the convenience and the value it offers is the key factor in growing its base of loyal customers. At February 2, 2019, the company operated 15,237 discount variety retail stores under the names of Dollar Tree, Family Dollar, and Dollar Tree Canada after a complete purchase of The Company’s ability to deliver a preferred shopping experience to customers is supported by supply chain and technology, the company’s devotion to innovation, loyalty offerings such as REDcard Rewards and Cartwheel, and a disciplined approach to managing the business and investing in future growth. The company operates as a single segment designed to enable customers to purchase products seamlessly in stores or through digital channels. Since 1946, the company has given 5 percent of the profit to communities. Family Dollar and 8200 In 2015, the company sold pharmacy to CVs and stores in 2015. discontinued business in Canada in the same year. Page number Page 6 Page 2 reference 3. 2 Total Assets Dollar Tree, Inc. $13,501.2 Total Liabilities $7,858.3 Total Equity or Financial Total Statement Name Shareholders’ as stated in the Investments 10-K $5,642.9 Consolidated Balance Sheets Numbers are stated in: Millions Target $41,290 $29,993 $11,297 Consolidated Corporation Statements of Numbers are Financial stated in: Position Millions Compare and Contrast the size of the net assets (same as book value or same as equity) of the two companies. When comparing the two companies, we can see that Dollar Inc. is approximately half the size of Target Inc. 4. Sales or Net Cost of Sales Sales Dollar Tree, Inc. Numbers are stated in: $22,823.3 $15,875.8 Net Income or Financial Net Earnings Statement Name ($1,590.8) Consolidated Statements of Operations Millions 3 Target $74,433 $ 53,299 $2,937 Corporation Consolidated Statements of Operations Numbers are stated in: Millions Compare and Contrast the size of sales and net income of the two companies. In comparing the two companies, we can see that the sales of Target Inc. are more than three times the size of Dollar Inc. sales. Dollar Inc. additionally, experienced a loss in the fiscal year while Target Inc. experienced a profit. 5. Make sure Average assets- Return on Profit Asset Turnover=net you show Use the total Assets=Net Margin=Net sales or total Earnings/Averag Earning/Net sales revenue/average computations- assets from the you will not previous year e Assets or Total Revenue assets. earn credit if plus the total In percentage In percentage Show to 2 decimal you just type assets for the terms to 2 terms to 2 pts. in the answer current year and decimal pts. decimal pts. and do not divide by 2 provide how you derived the answer. Dollar Tree, (13,501.2+16,3 ($1,590.8)/14,91 ($1,590.8)/ $22,823.3/$ Inc. 32.8)/2= 7= $22,823.3= 14,917= $ 14,917 -10.66% -6.97% 1.53 Target (41,290+40,303 2,937/40,796= 2,937/74,433= 74,433/40796= Corporation )/2= 7.20% 3.95% 1.82 4 $40,796 Compare and Contrast and comment upon the findings. The ROA of Dollar Tree Inc. is less than that of Target Corporation. The asset turnover for Target Inc is higher than that of Dollar Tree Inc. which means that in Target Inc. there is a greater usage of assets to generate sales. The profit margin of Target Inc is higher than that of Dollar Tree Inc (experience loss) meaning that Target Inc. is able to control costs and expenses from sales. 6. Based on Consolidated Statements of Cash Dollar Tree, Inc. Target Corporation Inc. $1,766.0 $5,973 Larger Larger c. What are the two greatest adjustments Depreciation and Depreciation and made to net income to determine operating Amortization Amortization cash flows? Merchandise Flows for February 2, 2019 In Millions a. What was the dollar amount of the companies’ cash flow from operations? b. Is operating cash flows smaller or larger than net income? inventories d. Determine the dollar amount and Used ($816.7) Accounts payable Used ($3,416) direction (cash source-positive or usenegative) of cash flows from investing activities. 5 e. Determine the dollar amount and Used ($1,599.9) Used ($3,644) Yes Yes Investing Activities Investing Activities (817.1) ($3,516) Yes Yes Financing activities Financing Activities and how much did they pay cash? ($6,214.7) (281) h. Did the company purchase any of their No Yes Financing Activities Financing Activities direction (cash source-positive or usenegative) of cash flows from financing activities. f. Did the company purchase new property and equipment (“capital expenditures”) during the year using cash? Which section of the statements of cash flows did you find this information and how much did they buy using cash? g. Did the company reduce any long-term debt? Which section of the statements of cash flows did you find this information stock using cash? Which section of the statements of cash flows did you look this ($2,124) information? How much stock did they repurchase? i. Did the company pay dividends? Which section of the statements of cash flows did you look this information? How much did No Yes Financing activities Financing activities they pay in dividends? 7. ($1,335) Find and read the audit report of the consolidated statements (Both companies use the title Report of Independent Registered Public Accounting firm). 6 Make sure you are Dollar Tree, Inc. Target Corporation Inc. Who is the report addressed The Board of Directors and The Board of Directors and to? Shareholders Shareholders Who are the auditors? KPMG LLP Ernst and Young LLP What is the nature of the In our opinion, the In our opinion, Target opinion? You can copy the consolidated financial Corporation (the Corporation) sentence from the auditor’s statements present fairly, in maintained, in all material report which provides the all material respects, the respects, effective internal auditor’s opinion. financial position of the control over financial Company as of February 2, reporting as of February 2, 2019, and February 3, 2018, 2019, based on the COSO and the results of its criteria (page, 34). referencing the auditor’s report of the consolidated financial statements. operations and its cash flows for each of the years in the three‑year period ended February 2, 2019, in conformity with U.S. generally accepted accounting principles (Page, 43) Compare and Contrast the information provided in the report. The information in both audit reports is the same and also show that the audit was conducted following the US GAAPS 8. 7 Dollar Tree, Inc. Target Corporation Inc. Name the reports Management’s Report on Internal Changes in Internal Control from management Control over Financial Reporting Over Financial Reporting Changes in Internal Controls Evaluation of Disclosure in Item 9A. These names are bolded Controls and Procedures within Item 9A. Explain what each Establishing and maintaining Evaluation of Disclosure company has adequate internal control over Controls and Procedures provided to their financial reporting shareholders per Securities Exchange Act of 1934. Page number Page 81 and 82 Page 70 showing signature from CEO, CFO, and/or Board of directors 9. Dollar Tree, Inc. Inc. Target Corporation Inc. 8 Review the SWOT analysis Per the SWOT analysis, Target Inc. faces intense for both companies and Dollar Inc faces competition competition from local and summarize the competitive under the threat from local international companies in landscape. Your summary and international companies the retail market. This high must include specific who operate on a retail basis competition sometimes forces information for each company and who are based on store the company to exercise from the SWOT analysis size, store format, product differentiation by posted at D&B Hoovers merchandise quality, offering merchandise at low Business Browser database products and service prices as well as raising D&B Business Browser a free delivery. Key competitors promotional expenses. Major database in the BU online include the Big Lots Inc. competitors include Best Buy library. Dollar General corporation Co, Inc., Amazon.com, Wal- http://library.bellevue.edu/ among others. Mart stores among others. 10. Review the corporate governance guidelines and the Business Conduct Guide/Code of Ethics documents of each company by visiting the company websites I have provided for Dollar Tree https://www.dollartreeinfo.com/corporate-governances and for Target please use these two websites https://investors.target.com/corporate-governance/governance-overview and https://corporate.target.com/about/purpose-values/Ethics Dollar Tree, Inc. Target Corporation Inc. Summarize 5 key The Board’s Nominating and The purpose of the document areas that pertain Corporate Governance Committee is to set out how the corporate Do not provide a list, but provide detail specific information for each company 9 to corporate is responsible for overseeing and management structure is set governance for reviewing the Guidelines and up. each company that reporting and recommending to the are provided in the Board any changes to the documents at each Guidelines. These guidelines shall company’s be posted on the Company’s website. website and accessible to all Selection of Chair & CEO, Board Committees, Term Limits, Retirement Age, Formal Evaluation of CEO. investors. Summarize 5 key areas that pertain to ethical behavior for each company that are provided Reporting violations Legal Compliance Commitments to associates Commitments to associates Humility and Integrity Integrity Security trading laws Vendor relationships Vendor relationships Securing trading laws in the documents at each company’s website. 11. Make sure you Book value, Market value-show Market-to-Book ratio –show show which is total your calculation, your calculation which is computations equity which is Closing market value/book value applicable to price on February 1, the stockholders 2019(I have a link in of the company the instructions to find the closing price) times number of shares outstanding. Make sure you are using outstanding 10 shares of stock which can be determined by referencing the balance sheet. Dollar Tree, Inc. $5,642.9 million Target Corporation Inc. $11,297 million 96.69*237,900000= 23,002,551,000/5642900000= 23,002,551,000 4.08 69.38*517,761,600= 35,922,299,808/11297000000= 35,922,299,808 3.18 Comment: Both Dollar Tree Inc. and Target Inc. market values exceed the book values. This is based on the brand equity that is not reflected on the balance sheet. 11
