Dollar General Corporate Bonds and Leverage Analysis
| DG Stock | USD 74.64 0.72 0.97% |
Dollar General holds a debt-to-equity ratio of 2.503. At this time, Dollar General's Short Term Debt is most likely to increase significantly in the upcoming years. The Dollar General's current Long Term Debt is estimated to increase to about 6.5 B, while Debt To Equity is projected to decrease to 0.71. . Dollar General's financial risk is the risk to Dollar General stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Dollar General's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Dollar General's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Dollar Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Dollar General's stakeholders.
For most companies, including Dollar General, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Dollar General, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Dollar General's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book 2.2194 | Book Value 33.014 | Operating Margin 0.0539 | Profit Margin 0.0357 | Return On Assets 0.0425 |
Dollar |
Given the importance of Dollar General's capital structure, the first step in the capital decision process is for the management of Dollar General to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Dollar General to issue bonds at a reasonable cost.
Dollar General Debt to Cash Allocation
Many companies such as Dollar General, eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
Dollar General reports 18.09 B of total liabilities with total debt to equity ratio (D/E) of 2.5, which may imply that the company relies heavily on debt financing. Dollar General has a current ratio of 0.99, implying that it has not enough working capital to pay out debt commitments in time. Note however, debt could still be an excellent tool for Dollar to invest in growth at high rates of return. Dollar General Total Assets Over Time
Dollar General Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Dollar General uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.Dollar General Debt Ratio | 29.0 |
Dollar General Corporate Bonds Issued
Most Dollar bonds can be classified according to their maturity, which is the date when Dollar General has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Dollar Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning Dollar General Use of Financial Leverage
Dollar General's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Dollar General's total debt position, including all outstanding debt obligations, and compares it with Dollar General's equity. Financial leverage can amplify the potential profits to Dollar General's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Dollar General is unable to cover its debt costs.
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 18.1 B | 19 B | |
| Net Debt | 17.6 B | 18.4 B | |
| Short Term Debt | 3.5 B | 3.7 B | |
| Long Term Debt | 6.2 B | 6.5 B | |
| Long Term Debt Total | 8.1 B | 8.5 B | |
| Short and Long Term Debt | 883.9 M | 928.1 M | |
| Net Debt To EBITDA | 5.32 | 0.95 | |
| Debt To Equity | 1.24 | 0.71 | |
| Interest Debt Per Share | 39.71 | 2.35 | |
| Debt To Assets | 0.27 | 0.29 | |
| Long Term Debt To Capitalization | 0.48 | 0.25 | |
| Total Debt To Capitalization | 0.55 | 0.41 | |
| Debt Equity Ratio | 1.24 | 0.71 | |
| Debt Ratio | 0.27 | 0.29 | |
| Cash Flow To Debt Ratio | 0.29 | 0.36 |
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Check out the analysis of Dollar General Fundamentals Over Time. For more detail on how to invest in Dollar Stock please use our How to Invest in Dollar General guide.You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Is Consumer Staples Distribution & Retail space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Dollar General. If investors know Dollar will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Dollar General listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth (0.20) | Dividend Share 2.36 | Earnings Share 6.43 | Revenue Per Share 180.613 | Quarterly Revenue Growth 0.042 |
The market value of Dollar General is measured differently than its book value, which is the value of Dollar that is recorded on the company's balance sheet. Investors also form their own opinion of Dollar General's value that differs from its market value or its book value, called intrinsic value, which is Dollar General's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Dollar General's market value can be influenced by many factors that don't directly affect Dollar General's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Dollar General's value and its price as these two are different measures arrived at by different means. Investors typically determine if Dollar General is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Dollar General's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
What is Financial Leverage?
Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.Leverage and Capital Costs
The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.Benefits of Financial Leverage
Leverage provides the following benefits for companies:- Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
- It provides a variety of financing sources by which the firm can achieve its target earnings.
- Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.