Homework answers / question archive / Financial Statement Analysis Case 4: Dollar General and Dollar Tree Ratio Analysis Find the data for this case in the Excel file “4

Financial Statement Analysis Case 4: Dollar General and Dollar Tree Ratio Analysis Find the data for this case in the Excel file “4

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Financial Statement Analysis Case 4: Dollar General and Dollar Tree Ratio Analysis Find the data for this case in the Excel file “4. DT and DG FY21 Data.xlsx”. 1. Create common size income statements and perform a basic ratio analysis of the two companies for fiscal year 2021, which is the fiscal year ended on Jan. 29, 2022/Jan. 28, 2022. (Note: fiscal year 2021 for both companies ends in the 2022 calendar year.) Be sure to discuss notable differences and similarities of the following: a. Return on Assets (ROA) b. Return on Equity (ROE), computed as net income ÷ average shareholders’ equity c. Leverage, computed as average Assets ÷ average Equity d. Profit Margin, including drivers of differences gathered from common size income statement e. Turnovers, including drivers of differences like working capital (cash conversion cycle) and PPE turnover. f. Which company has the better performance with references to the above related ratios to justify your selection. 2. Categorize the financial statements into operating and nonoperating components. For brevity, list out only the nonoperating income statement and balance sheet accounts for both companies. 3. Calculate the following for each firm for fiscal year 2021: a. Return on Net Operating Assets (RNOA) b. Net Operating Profit Margin (NOPM) c. Net Operating Asset Turnover (NOAT) d. Financial Leverage (FLEV) e. Spread (=RNOA – Net Nonoperating Expense Percent) f. Show that RNOA + (SPREAD × FLEV) equals the same ROE that in computed in 1b. above. g. In light of new information gathered from the separation of operating and nonoperating financial statement items, which company has the better performance? Use a fiscal year 2021 statutory tax rate of 24.7% for Dollar Tree and 23.5% for Dollar General.