The family dollar company is basically a chain of stores that offer different assorted products such as clothing, food, and other supplies that a common family needs. This fact about the company's standing as a proper resource of practical items that is needed by the common family gives it a bit of an edge in making specific name in the market.
Refinements and Growth. Refinements have been made through the years but its marketing edge remains to be meeting the needs of its customers for good quality but low cost merchandise (Family Dollar). The company basically thrived within a basic improved growth during the 1980's but gradually the growth slowed down during the 1900's when particular retail store brands already entered the arena of modern business industries such as that of Wal-Mart.
"Over the years, Family Dollar has matured into a highly sophisticated retailer while staying true to its roots. An efficient distribution system, astute management and adoption of new technology and systems have enabled Family Dollar to keep up its industry-leading metrics in new store sales productivity, return on invested capital and comparable-store sales" (http://findarticles.com)
Today, although the Family Dollar company remains to be within the competition, it is surely in need of improving its ways to keep up with what other competitor organizations put up for the establishment of a better standing in the industry of international retailing. The company now belongs to the Fortune 400 and S&P 500.
THE COMPANY'S CAPITAL STRUCTURE AND LEVERAGE PRACTICES
During the 1970's it could be seen how the stock shares of the company grew to a level of competitive stand within the stock market. This was the time when it went public for at least $14.50 per share. From this particular standing, the business began to grow towards prosperity and increased rate of profits in an annual basis. As the business grew towards a more inquisitive sense of market control, the ways by which the business have seen their practical position in the industry as a particular competitive organization in the field of retail marketing and product distribution.
The CEO's that come and go in the company have effectively managed the capital of the business. However, because of the preserved views towards earning more through establishing more branches, the balance of seeing matters clearly have placed the Family Dollar in quite a stable yet non-moving position in the industry as larger organizations come into the scene. This is the reason why there is a need to shift the focus from profit to customer satisfaction considerations.
"Despite being the underdog in sales and store count, Family Dollar is still the favored stock of many analysts due to a strong growth outlook and best-in-class financial metrics that give it an edge over Dollar General" (http://findarticles.com)
The company seems comfortable going public as it constantly declares dividends while also actively looking for investment opportunities. The company gives quarterly dividends to its investors and has specifically reported an 8% increase in dividends at the start of 2009. Recently, Family Dollar Company was reported to make a presentation "to the investment community at Barclays Capital Retail and Restaurants Conference" (Family Dollar).
ANALYSIS OF THE COMPANY'S CAPI
Family Dollar Stores, Inc. (Family Dollar) operates a chain of general merchandise retail discount stores across the United States. The company offers general merchandise in four categories such as consumables, home products, apparel and accessories, and seasonal and electronics" (Bharat Book Bureau).
Capital structure theories have developed framework for defining aspects and patterns of capital structure as well as response to changing dynamics and hence, owing to the financial crisis and distressed period the capital structure of the firm have also shown responses.
The Modigliani – Miller theorem or proposition is regarded as a key element in the development of today’s corporate finance. The bottom line of the Modigliani and Miller theorem is the proposition of irrelevance which argue that the value of a firm is not affected by the type of financial choices preferred by that firm.
The equity investors become part-owners and partners in the business and tend to exercise some control over how the business is run. The capital structure is signified by the firm's debt-equity ratio and gives an insight as to how risky the firm is.
It gives the Weighted Average Cost of Capital (WACC).
They also recommended that an ideal capital structure of a firm is with all debt with cheaper debt finance than higher cost & riskier equity but an optimal capital structure exists in which the terms of debt financing & such other real world problems of debt financing (like bankruptcy due to high debt) and tax savings of the debt financing are balancing factors (Modigliani and Miller.
The author states that evaluating the financial ratios of CVS shows that it has a debt-equity ratio of 28.4% which has impressively improved as compared to where it stood a year ago, i.e. 38.65% in 2005. This shows that CVS is not highly leveraged and comprises of a large proportion of equity in its capital structure.
rent working capital policies of the firm can be mostly considered as conservative in nature as Family Dollar employ most of its own internally generate funds to finance its working capital needs. Such practice may be healthy as the firms often attempt to save finance cost if
It can be used to influence the behaviour of the market participants. A reputed firm can take the advantage of its powerful position in negotiating favourable terms of credit from the suppliers. (Matsa, 2006). Capital is a strategic tool influencing the
The most important consideration is what form of capital structure would be most helpful in maximizing the firms value. This paper seeks to address the issue of what constitutes an optimal capital structure, and what
Respectively, I conjure that varied capital sources are typically based on different costs and thus, needed appropriate analysis for designing an optimal capital structure for raising required finance appropriately (Grundy, n.d.).
In businesses, sources of
A firm with more leverage may earn higher returns on average than a firm with less leverage, but the returns on the more leveraged firm will also be more volatile.
Breakeven analysis also known as cost-volume profit
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