Comparing of Financial Statement for Similar Companies

Introduction Freds, Belk, man-sized wads and dollar mark manoeuvre atomic moment 18 all famous manakin clove pink in United State. All of them provide variant and qualified goods to nodes. This analysis stem, discussing different pecuniary data based on the 10-K memorial of the quaternion companies, wants to give readers a signalizeificant describe to these companies so investors can wee-wee clear opinions to help decide. come with Profiles Freds, Inc. Freds) is to fit the worldwide sell and pharmacy inescapably of the small to medium- coat towns it serves by go a wider variety of quality trade and a more attractive outlay-to- range blood than either drug stores or smaller variety/dollar stores and a shopper-friendly dress which is more convenient than larger sized dis count ware stores. The caller-ups make barters of p harmaceuticals have a percentage of 33. 5% in 2010, 34. 1% in 2011, and 34. 9% in 2012, examine to the total revenue enhancem ent income gross revenue. And its major sales of opposites acknowledge households good and food products, etc. display that the company tries its best to consort its worry st hogegy. astronomical hemorrhoid, Inc. is a Fortune calciferol sell corpo symmetryn. The company is based in Columbus, Ohio, USA and actually operates over 1,400 stores in 47 states. Its discussion section stores focus chiefly on selling closeout and over expect swop. thither are whatsoever items in the stores, such(prenominal) as foodstuffs, that are replenished on a continual basis. Whats more, free lashings also operates a wholesale division, which provides merchandise in bulk for resale from a variety of categories.Financial teachingsBig Lots uses an existing building, such as a grocery or department store that had either moved or ceased ope dimensionns. dollar mark point, Inc. began its operations in 1953 and was corporal in Virginia. The company is an American set up of discount var iety stores that se lls every item for $1. 00 or less. The company tar pisss rugged to glower-middle income consumers and sells everyday products from food and personal accusation products to non-essentials. It sells its product in three moving in segments1) Consumable merchandise, which accounted for 48. % of its sales in 2011, 2) bod merchandise, which accounted for 46. 9% of 2011 sales, and 3)seasonal goods, explained 5% of 2011 sales. Belk, Inc. , together with its subsidiaries, is the largest in private owned mainline department store backup in the United States, with 303 stores in 16 states, as of the financial stratum ended January 28, 2012. Generated tax incomeations of $3. 7 billion for the fiscal year 2012, and together with its predecessors, have been successfully direct department stores since 1888. Belk Stores Services, Inc. , a supplemental of Belk, Inc. rovides a wide range of serve t o the Belk division transferices and stores, such as merchandising, me rchandise planning and al place, advertizement and sales promotion, in ashesation systems, human resources, worldly concern relations, account tale, real estate and store planning, credit, legal, tax, dispersal and purchasing. Accounting Policies (see present 1) All of the quadruplet companies are United State location so that part of their accounting policies are the same, but because the area location and business strategy, they have some different accounting policies.The four companies do non amortized grace and well-tried them for irregularity annually, exploitation an income burn up and a mart onward motion in find out fair treasure for purposes of saving grace outrage tests. All four of them report income taxes in accordance with FASB ASC 740, the plus and financial obligation mode is apply for calculation forthcoming income tax consequences of events . The major differences exist in revenue learning, merchandise inventories and Stock-based salary.B ased on their requirements, Freds records its sales when the merchandise is shipped from the Companys storage warehouse Dollar direct records sales revenue at the cartridge holder a sale is made to its customer Big Lots sales Revenue is recognize when the customer makes the final payment and takes self-denial of the merchandise and sales of Belk is put down at the time of delivery. Freds determines inventories at the lower of speak to or merchandise use the sell first -in, first-out method for goods in stores and the follow first -in, first-out method for goods in our diffusion centers. And the rest of hree companies values inventories at the lower of personify or commercialise apply the comely equal sell record method. Under the average personify retail history method, inventory is discriminate into departments of merchandise having similar characteristics at its current retail selling value. pull inability, Liquidity/Solvency (see Exhibit 2) If we psych o essay the current ratio and speedy ratio they are relatively small. So remunerative the short term debts mogul be a problem for the company as well as the fluidity is get decreased from year 2010 2012 as 1. 43 to 1. 23 to 0. 88.So it might be arduous for the company to stay with the current obligations. If we analyze the debt - faithfulness ratio seems to be in heightsschool end for the Belk, but it is gradually fall 1. 36, 1. 06 to 1. 03. This seems to be a good sign for the company. But still the ratio is high and need quite bit of puzzle out to get it down to an acceptable value. Freds roe keeps a ontogenesis from 5. 99% in 2010, to 7. 17% in 2011 then to 7. 89% in 2012 because its meshing edge increase from 1. 32% to 1. 61% and 1. 78%, respectively in 2011 and 2012, in the same time, its additions swage keeps a steadily level from 3. 20 to 3. 06, just a slightly decrease.Additionally, the rank brink just has a high change from 27. 92% in 2010, to 28. 66% in 2012 than pay margin. The inventory swage has a decrease from 4. 33 to 4. 15 respectively in 2010 and 2012, due to the cost of goods exchange increasing slower than inventory. Whats more, the current ratio and diligent ratio keeps falling down, and debt/equity ratio creates up during the 3 years, line of battleing that the debt increases faster than equity. Big Lots ROE continues to grow from 20. 01% in 2010 to 25. 15% in 2012. However, it s turn a profit margin and gross margin have been going downwards since 2010, displace to 3. 98% and 39. 9% respectively in 2012. Whats more, its current ratio and quick ratio have also decreased, the source one has slacked from 2. 069 in 2010 to 1. 721 in 2012, a nd the later one has slummed from 0. 72 to 0. 31, which indicate that the companys breed are more peeveden up in recent years. Through tho study, we found that the D-E ratio is increasing from 1. 208 in 2010 to 1. 704 in 2012, which presented the companys cutting financing strategy from resumeing, some another(prenominal) than acquiring capital from the shareholders. The ROE of Dollar tree increased rapidly from 22. 43% in 2010 to 27. 23% in 2011 and to 36. 32% in 2012. On examining the three omponents of ROE, the profit margin was 6. 3% in 2010 but in 2012 it increased at 7. 36%. In addition, its additions derangement maintains a steady growth. It was 2. 28 in 2010, 2. 47 in 2011 and 2. 85 in 2012. Over the three years, the debt -equity ratio also grows steadily. Besides, the current ratio and quick ratio of Dollar Tree in the past three years patently declined. That mostly resulted from the increasing debt and surging sales . Return on law roughly doubled from 2010 to 2011 as 6. 31% to 11. 33% and has a steady growth from 2011 to 2012 as 15. 30%. This implies remuneration Income increased and it is proportional to good increase in profit margins as from 2% to 3. 63% to the highest degree doubled from 2010 to 2011 and 4. 95% in 2012 which i s a steady growth. When we compare the original asset turnover in last 3 years seems to be decreasing, though it is 13. 1 in 2010 decreased significantly form 2011 and 2012 as 1. 14 and 1. 50 respectively. This might be due to competition from other department and specialty stores and other retailers, including opulence goods retailers, mail o rder retailers and offprice and discount stores. Opportunities/Threats Opportunities from the above, we get the idea that the variety store persistence has a good time during the some(prenominal) years.These four companies are keeping increase in profit and they have lower financial trauma so that they could borrow more money from banks and investors, which gives them more chances to execute expansion strategy more gettable cash from borrowing, better financial statement which can give more impudence to in vestors and higher return to embody the future development. Threats we should notice that most of the four companies have a higher gross margin increasing than profit margin, and a continuous lower inventory turnover.They show that these companies structures include threaten in the future. Whats more, the high debt means that the banks and investors tighten polices and requirements to the companies so their business and expansion will be influenced by investors. Meanwhile, the raising interest rat e of debt gives higher financial distress to the companies. Overall Assessment Retail effort is a highly competitive and propellant business to work with. So it necessitate to be change whenever it needs to be. here we can see that when one company doing well other companies are seek to stay in the race.If we analyze the overall challenges retail business facing is equal high Employee turnovers, also Auditing issues as they on a regular basis engaged in competition with one another, and this competition can creat e price wars, forcing a need to keep tight control over inventory, as the terra firma prospers and people have more money to spend, the retail industry generally flourishes. As for the companies we can see that Freds, Dollar tree and Belk is seems to be doing well in this challenging situations, but the Big Lotus is losing some ground as profit margins get lower as well as their funds getting tightens up.However when we see the COGS from each one company has a problem as COGS selling slower than the inventory, this might be hurting all four companies as if their items old they have to write off them and which might eventually losing money. Exhibit 1 Significant Accounting Policies Freds Revenue recognition Merchandise inventories Goodwill Stock-based compensation Income taxes Dollar tree Big Lots Belk gross sales are recorded when the merchandise is shipped from the Companys warehouse sales revenue at the time a sale is made to its customer Revenue is recognized when the customer makes the final payment and takes possession of the merchandise.Sales from retail operations are recorded at the time of delivery. set at the lower of cost or market using the retail first-in, first-out method for goods in our stores and the cost first-in, firstout method for goods in our dispersion centers. Stated at the lower of cost or market, determined on a weighted-average cost basis. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are computed by applying a mensurable cost-to-retail ratio to the retail value of inventories. Valued at the lower of cost or market using the average cost retail inventory method. Under the average ost retail inventory method, inventory is segregated into departments of merchandise having similar characteristics at its current retail selling value. Valued using the lower of cost or market value, determined by the retail inventory method. Under the retail inventory method (RIM), the valuation of inventories at cost and the resulting gross margins Goodwill is not amortized and tried for impairmen t annually. Use an income approach and a market approach in ascertain fair value for purposes of grace loss tests. Goodwill is not amortized and tested for deterioration annually. Use an income approach and a market pproach in determining fair value for purposes of goodwill disadvantage tests. Goodwill is not amortized and tested for handicap annually. Use an income approach and a market approach in determining fair value for purposes of goodwill impairment tests. Goodwill is not amortized and tested for impairment annually. Use an income approach and a market approach in determining fair value for purposes of goodwill impairment tests. Uses the fair value recognition supply of FASB ASC 718, account for seam based compensation by using the grant employment fair value of share awards and the estimated number of shares that will at last be ssued in conjunction with each award. Recognizes all share-based payments to employees, including grants of employee stock opt ions, in the financial statements based on their fair values. Value and depreciate stock options with graded vesting as a individual(a) award with an average estimated life over the entire term of the award. Uses the fair value recognition provisions of FASB ASC 718, account for stock based compensation by using the grant date fair value of share awards and the estimated number of shares that will ultimately be issued in conjunction with each award. reports income taxes in accordance with FASB ASC 740,the asset and obligation ethod is used for computing future income tax consequences of events reports income taxes in accordance with FASB ASC 740,the asset and liability method is used for computing future income tax consequences of events reports income taxes in accordance with FASB ASC 740,the asset and liability method is used for computing future income tax consequences of events reports income taxes in accordance with FASB ASC 740,the asset and liability method is used for co mputing future income tax consequences of events Exhibit 2 Industry Ratio thickset 2012 Freds, Inc. 2011 doughability Return on equity 7. 89% 7. 17% 5. 99% 25. 15% 23. 50% 20. 01% 6. 32% 27. 23% 22. 43% 15. 30% 11. 33% 6. 31% Profit margin 1. 78% 1. 61% 1. 32% 3. 98% 4. 49% 4. 23% 7. 36% 6. 75% 6. 13% 4. 95% 3. 63% 2. 00% Gross margin 28. 66% 28. 61% 27. 92% 39. 79% 40. 63% 40. 61% 35. 87% 35. 49% 35. 49% 0. 33% 0. 33% 0. 32% Total asset turnover 3. 06 3. 16 3. 20 3. 169 3. 057 2. 831 2. 85 2. 47 2. 28 1. 5 1. 41 13. 1 A/R turnover 62. 61 64. 58 61. 93 42. 45 41. 39 40. 11 76. 42 78. 53 72. 33 104. 9 131. 3 118. 7 Inventory turnover 4. 15 4. 33 4. 33 3. 8 3. 86 4. 02 4. 2 4. 2 4. 1 2. 9 2. 97 2. 83 Short term liquidity flow ratio 2. 47 2. 91 2. 81 1. 721 1. 941 2. 069 2. 08 2. 5 2. 74 2. 51 3. 34 3. 32 0. 33 . 52 0. 57 0. 31 0. 53 0. 72 0. 59 1 1. 31 0. 88 1. 23 1. 43 0. 49 0. 40 0. 43 1. 704 1. 283 1. 208 0. 73 0. 63 0. 6 1. 03 1. 06 1. 36 Quick ratio bulky term solvency Debt/E quity ratio 2010 2012 Big Lots 2011 2010 2012 Dollar Tree 2011 2010 Belk. inc 2012 2011 2010 Profit Margin Return on Equity 40. 00% 35. 00% 30. 00% 25. 00% Freds, inc 20. 00% Big Lots 15. 00% Dollar Tree 10. 00% Belk. inc 5. 00% 0. 00% 2012 2011 8. 00% 7. 00% 6. 00% 5. 00% 4. 00% 3. 00% 2. 00% 1. 00% 0. 00% Freds, inc Big Lots Dollar Tree Belk. inc 2012 2010 2011 2010 Debt-to-Equity Ratio Inventory turnover 2. 00 5. 00 4. 00 Freds, inc 3. 00 Big Lots 1. 50 Freds, incBig Lots 1. 00 Dollar Tree Dollar Tree 2. 00 Belk. inc 1. 00 Belk. inc 0. 50 0. 00 0. 00 2012 2011 2010 2012 2011 2010 Exhibit 3 Income statement Fred,inc Statement of Income January 28, 2012 Net sales Cost of goods exchange 1879059 1340519 one C% 71. 34% Gross profit 538540 Depreciation and amortization degree centigrade% 71. 39% 1788136 1288899 speed of light% 72. 08% 28. 66% 527018 28. 61% 499237 27. 92% 34190 1. 82% 29236 1. 59% 26387 1. 48% Selling, general and administrative expenditures 453195 24. 12% 451064 24. 49% 434356 24. 29% operating(a) income divert income Interest expense 51155 -156 553 2. 72% -0. 01% 0. 03% 46718 -234 424 2. 54% -0. 01% 0. 02% 38494 -189 82 2. 15% -0. 01% 0. 03% Income before income taxes 50758 2. 70% 46528 2. 53% 38201 2. 14% Provision for income taxes 17330 0. 92% 16941 0. 92% 14586 0. 82% 33428 1. 78% 29587 1. 61% 23615 1. 32% $ $ January 30, 2010 1841755 1314737 Net income $ January 29, 2011 $ $ $ Big Lots, Statement of Income January 27, 2012 Net sales Cost of goods sold Gross profit Selling, general and administrative expenses some other Operating Expense Operating income $ January 28, 2011 5,202,269. 00 3,131,862. 00 2,070,407. 00 one hundred. 00% 60. 20% 39. 80% 1,634,532. 00 January 29, 2012 4,952,244. 00 2,939,793. 00 2,012,451. 00 100. 00% 59. 36% 40. 64% 31. 42% 1,567,500. 0 90,280. 00 1. 74% 345,595. 00 6. 64% $ 4,726,772. 00 2,807,466. 00 1,919,306. 00 100. 00% 59. 39% 40. 61% 31. 65% 1,532,356. 00 32. 42% 78,606. 00 1. 59% 74,904. 00 1. 58% 3 57,345. 00 7. 22% 325,010. 00 6. 88% $ Earnings out front Interest And revenuees Interest Expense 345,422. 00 6. 64% 357,957. 00 7. 23% 325,185. 00 6. 88% 3,530. 00 0. 07% 2,573. 00 0. 05% 1,840. 00 0. 04% Income Before evaluate 341,892. 00 6. 57% 355,384. 00 7. 18% 323,345. 00 6. 84% Income Tax Expense 134,657. 00 2. 59% 132,837. 00 2. 68% 121,975. 00 2. 58% Net income 207,064. 00 3. 98% 222,524. 00 4. 49% 200,369. 00 4. 24% Dollar Tree, Statement of Income January 28,2012Revenues $ January 29,2011 Selling and admistrtive expense 64. 13% 35. 87% 3,794. 8 2,087. 60 1,596. 2 Gross margin 100% 4252. 2 2378. 3 cost of sales 6630. 5 $ 5882. 40 24. 07% 1,457. 60 100% January 30,2010 $ 5,231. 20 100% 64. 51% 35. 49% 3,374. 40 1,856. 80 64. 51% 35. 49% 24. 78% 1,344. 00 25. 69% Restructing charges Goodwill impairment intangible and other asset impairment operating expense $ 1,596. 2 24. 07% operating income interest expense interest income other income 782. 1 2. 9 0. 3 11. 80% 0. 04% Income before income taxes Net income $ 1,457. 60 24. 78% 10. 71% 0. 10% 0. 00% 630 5. 6 5. 5 779. 5 ncome taxes $ 11. 76% 291. 2 488. 3 4. 39% 7. 36% 1344 25. 69% 9. 80% 0. 10% -0. 10% 512. 8 5. 2 629. 9 $ $ 10. 71% 507. 6 9. 70% 232. 6 397. 3 3. 95% 6. 75% 187. 1 320. 5 3. 58% 6. 13% $ Belk, Statement of Income 2012 2011 Revenues 3,699,592 100% Cost of goods sold (Including occupancy, distribution and buying $ expenses) 2,461,515 66% 938008 2012 3513275 100% 2353536 66% 25% 914078 3143 0. 08% 2302 - Operating income Interest expense Interest income Loss on extinguishment of debt Gain on investments Income before income taxes Income tax expense Net income Gain on sale of property and equipment Asset impairment and exit costsPension curtailment charge $ 100% 2271925 68% 26% 886263 26% 6416 0. 18% 2011 0. 06% 0. 06% 0. 00% 6096 0. 17% 0. 00% 39915 2719 1. 19% 0. 08% 300190 Selling, general and administrative expenses 3346252 8. 11% 245981 7. 00% 147441 4. 41% -50218 328 -922 25 0098 66950 183148 -1. 35% 0. 01% 0. 02% 0. 00% 0. 0676 1. 80% 0. 0495 -50679 569 195871 68243 127628 -1. 44% 0. 02% 0. 00% 0. 00% 0. 0557 1. 94% 0. 0363 -51321 1027 43 97190 30054 67136 -1. 53% 0. 03% 0. 00% 0. 00% 0. 029 0. 89% 2 $ $ $ $ Exhibit 4 Balance Sheet Freds,inc Balance Sheets January 28, 2012 January 29, 2011 January 30, 2010 January 31, 2009 ASSETS occurrent assets coin and cash equivalents 27130 4. 29% 49182 8. 26% 54742 9. 58% Account Receivables Inventories 31883 331882 5. 04% 52. 51% 28146 313384 4. 73% 52. 62% 28893 294024 otherwise non-trade receivables 32090 5. 08% 26378 4. 43% Prepaid expenses and other current assets Total current assets 12321 435306 1. 95% 68. 88% 12723 429813 Property and equipment 161112 25. 49% 139931 Equipment down the stairs capital leases 97 0. 02% Intangible assets, loot 32191 5. 09% 22193 3. 73% 16035 2. 81% 9042 1. 66% Other noncurrent assets, net Total assets $ 3276 631982 0. 52% 100% $ 3591 595528 0. 60% 100% $ 4040 571441 0. 71 % 100% $ 4442 544775 0. 82% 00% LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Accounts payable $ 106886 16. 91% $ 81002 13. 60% $ 87393 15. 29% $ 69955 12. 84% 658 0. 10% 201 0. 03% 718 0. 13% 243 0. 04% Current portion of indebtedness $ $ $ $ 35128 6. 45% 5. 06% 51. 45% 28857 301537 5. 30% 55. 35% 25193 4. 41% 15782 2. 90% 2. 14% 72. 17% 10945 413797 1. 92% 72. 41% 11912 393216 2. 19% 72. 18% 23. 50% 137569 24. 07% 138036 25. 34% 39 Accrued expenses and other 44876 7. 10% 45371 7. 62% 39621 6. 93% 46659 8. 56% Deferred income taxes 23878 3. 78% 21142 3. 55% 19373 3. 39% 13061 2. 40% Total current liabilities 176298 27. 90% 147716 24. 80% 147105 5. 74% 137667 25. 27% Long-term portion of indebtedness 6640 1. 05% 3969 0. 67% 4179 0. 73% 4866 0. 89% Deferred income taxes 5633 0. 89% 2069 0. 35% 2009 0. 35% 1328 0. 24% Other noncurrent liabilities Total liabilities 19799 208370 3. 13% 32. 97% 17886 171640 3. 00% 28. 82% 17209 170502 3. 01% 29. 84% 13833 157694 2. 54% 28. 95% Common stock, Class A voting, no par value 105384 16. 68% 131367 22. 06% 131685 23. 04% 136877 25. 13% Common stock, Class B nonvoting, no par value Retained cabbage 317364 50. 22% 291649 48. 97% 268350 46. 96% 249141 45. 73% Accumulated other comprehensive income 864 0. 14% 872 0. 15% 904 0. 16% 1063