There can be a number of reasons for a company to go public or private. There are benefits, as well as disadvantages that go along with either course of action (Exhibit 1 for details). When firms decide to go private, they are no longer listed on any stock exchange market. The pressure of keeping accounting regularity and reporting to the public is no longer an issue. Instead, firms can be more flexible to reorganize the business profile as well as the management team. In many cases, shareholders and board members receive very rewarding financial benefits from this transaction. However, in some situations, public firms do not have a choice in the matter, as is the case in a “hostile takeover”.
In assessing Dollar General’s performance,
The company stays competitive and controls the largest share of the market. n | Name of ratio | Why important | Current value 2007 | Inference | I time-series (itself in different time periods). | 1 | ROA | how well the company is doing its operations, independently of financial costs | 5.2% against 13.0% | Declined due to NI loss due to real estate portfolio restructuring (NI is $137 mil in 2007 against average $350 mil in 2006-2005, I/S). | 2 | Profit margin of ROA | Shows level of expenses related to sales, how effective sales are and how well expenses are controlled | 1.5% against 4.3% average last years | Declined 2x because of the growing inventory, but as seen below in N5 SGA is still good | 3 | Days in inventory, inventory turnover | Due to retail nature of business and to explain the declining profit margin of ROA | 78 days against medium of 85 in previous years. Industry average 84 till 91 days. Inventory turnover above average 4.7 (4.3-4.0). Good result! | The company introduced a deep-discounted sale in response to growing inventory. Sales are successful. | 4 | Enterprise value / EBITDA | Represents a number of year needed to collect the company value from its earning, assuming company pays no Taxes, Dividends and no Amortization, and maintains the current level of profitability | 12.1 against medium 8 in previous years. Enterprise value increased relatively insignificantly (+1.9%). Company was