Individual Assignment: Financial Analysis of Dell Case Study Report

This report provides a detailed financial analysis of Dell, a global computer technology company, comparing its performance with competitors. The analysis covers financial ratios like liquidity (current and acid test ratios), return on investment, operating performance (profit margin), asset turnover, and debt-equity ratio from 2010 to 2014. The report also includes an introduction to Dell's background, its competitors (Apple, IBM/Lenovo, and HP), and concludes with recommendations for the company's upper-level management. The findings indicate Dell's need to improve its current assets relative to short-term liabilities, maintain a strong inventory management system, and increase research and development spending. The report suggests rethinking pricing strategies and retail distribution to enhance sales and customer engagement. The report uses financial data from 2010 to 2014 and includes appendices with financial statements.

Running Head: Dell
May 3, 2018
“INDIVIDUAL ASSIGNMENT:
(A CASE STUDY ON DELL)”
STUDENT AND TRAINER/ASSESSOR DETAILS
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TABLE OF CONTENTS
STUDENT AND TRAINER/ASSESSOR DETAILS..................................................................................1
COURSE AND UNIT DETAILS............................................................................................................1
Abstract..............................................................................................................................................3
Chapter 1: Introduction......................................................................................................................3
1.1 Background.........................................................................................................................3
1.2 Summary.............................................................................................................................4
Competitors of Dell........................................................................................................................4
Chapter 2: Financial Ratios................................................................................................................6
2.1 Liquidity (Current Ratio and the Acid Test Ratio)..............................................................6
2.2 Return on Investment..........................................................................................................6
2.3 Operating Performance........................................................................................................7
2.4 Asset Turnover and the inventory turnover.........................................................................7
Chapter 3 Conclusions and Recommendations..................................................................................7
3.1 Conclusions..............................................................................................................................7
3.2 Recommendations....................................................................................................................8
Reference List....................................................................................................................................9
Appendices.......................................................................................................................................10
Appendix 1...................................................................................................................................10
Appendix 2...................................................................................................................................11
Appendix 3...................................................................................................................................12
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ABSTRACT
This report focusses upon the financial analysis of Dell comparing with other companies, a
worldwide famous computer technology company which generally product various technical staff
for their customers globally. This report contains the financial situation and based on that there is a
recommendation to the upper-level management of Dell. In this respect different financial
statement ratio, like ROI, liquidity, capital structure, operating performance, solvency and also the
market measures from the year 2010 to the year 2014. In the end, a conclusion has been drawn
from the above financial analysis and thus with some extents, there is an enhancement along with
the investment recommendation.
CHAPTER 1: INTRODUCTION
1.1 BACKGROUND
There are several computer industries which are the core business of the present technological era.
It has been noticed that those companies work hard for making more number of innovative
products which becomes very useful in each spare of the life. Dell has been working for many
years to enhancing the lifestyle of the consumers. In the year of 1984, Dell was founded through
by the student of University of Texas at Austin, Michael Dell. Afterwards, this computer company
comes with many computing technologies like printers, assembled computers, mainframes,
mainframes, scanners and other electronic devices which is easier for the people to accomplish the
workforce. Through the revolutions in the industry, there are many positive reflections has been
found out in case of manufacturing along with the financial sectors. Also in USA markets, there is
impartially soaked along with the mature and also there is a spontaneous growth within the world.
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Moreover, this growth is continuing in the case of Asia Pacific as well as Africa as well (Cordella,
Dell’Ariccia, & Marquez, 2018).
1.2 SUMMARY
Thus the Client Solution Group (Dell) been continued with outperforming the market in
worldwide, especially with the overall PC market that is moved back to the positive year after year
growth on a quarterly basis. The strategy for Dell is essential in the case to provide the
infrastructure for resonating with the customers, for whom the Dell Technologies became
transformed and also found to be digitized under the environments. In this scenario, some key
highlights points are given below:
1. The server has recorded the revenue and the double-digit system growth with the servers in
respect to the second consecutive quarter. Also, the worldwide leader in the servers has
been outgrowing the market within the units for the revenue with both the mainstream as
well as the hyper-scale (Dell'Era, Landoni, & Verganti, 2015).
2. Dell technologies have launched another dedicated internet of Things (loT) division for
aiming at their coordination within the development for loT products which in turn
includes labs, consumption models, and products for helping the customers speed in the
case to implementing the loT solutions (Dell Technologies, 2018).
However, in this report, there is a brief discussion on the financial ratios as shown in the next
section.
COMPETITORS OF DELL
Apple
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In today’s world Apple Computer is the one of the top most and well-known computer
manufacture and design company. Besides computer it also designs as well as develops many
markets portable digital music players, music related accessories and also the services which
includes the online distribution for music videos, third-party music, television shows, audio books
and many other short films.
Unlike Dell, the marketing strategy for Apple, always depends on the innovative computer designs
and techniques which always be giving away the software for getting the people for buying
hardware. Contrary view of apple for marketing is to emphasis more on the hardware set up which
must be unique in the world so that the valuable customers want to play for that (Weinstein &
Winston, 2016).
IBM/Lenovo
Another very well-known company in compere to Dell is Lenovo Group Limited which is one of
the largest personal computer manufacturers within the region of Asia-Pacific in the year of 2006.
This company produces servers, imaging equipment, desktop, handheld computer, laptop along
with the mobile phone handsets etc. like Dell (Pollard, Chuo, & Lee, 2016). The product lines of
the personal computer is to cover all the market segments with the high end towards the low end
and after getting combining with IBM PSs, it now contains a huge range of personal computer
along with laptop where they have increased their innovation in the case of customers developing
within more low power, lighter so that it can be easier to use those kind of product. The
competitive advantage for the company is depending on the hardware reliability along with better
customer complaint management as well as lower failure rate in the case of notebook PC (Stark,
2015).
HP
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Hewlett-Packard is the most important and closest competitor of Dell in today’s market. But
unlike Dell, the focus of HP is to drive the efficiencies along with the gaining of productivity
within both the direct as well as indirect business. The mix of the business for HP is to have the
channel or the direct sales which has been differed substantially within the business within the
region. Some of the business segments are as follows:
1. Personal Systems Group or PSG can manage SMB computer relations along with the
commercial reseller channels through which HP use to sells a large amount of commercial
PCs (Kotler, 2015).
2. Technology solutions Group or TSG, through which HP can manage enterprise along with
public sector customer relationships and also they have charged with the simplified sales
within the processes across the other segments in order to improve the speed as well as
effectiveness in the case of customer delivery (Saebi & Foss, 2015).
CHAPTER 2: FINANCIAL RATIOS
2.1 LIQUIDITY (CURRENT RATIO AND THE ACID TEST RATIO)
From the statement given for Dell (appendix 1-3), it has been found that the average
current ratio for Dell is about 1.19 whereas the acid test ratio becomes 0.95. These modes
are described that Dell is needed to cover some more current asset with short-term
liabilities so that Dell will be on the safer side and will become a more financially strong
organization (PR Newswire Association LLC, 2017).
Formula to calculate the ratio: Current Ratio = (Current Asset / Current Liabilities) =
(27968/ 23439) = 1.19 (for year 2014)
Acid test ratio = (Cash and Cash Equivalents + Receivables) / Current Liabilities
= (12,569 + 6629 + 3213) / 23,439
= 0.95 ( for year 2014)
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2.2 RETURN ON INVESTMENT
It is a very important financial ratio which is equivalent to return on asset ratio and it
helps to indicate the earning per dollar from the assets. Also, from averages of
consequently three years in the case of return on assets for Dell becomes 7.89%. So, this
high value of percentage supports Dell as it uses more efficiently its assets along with the
high range for earning the products sold within the company asset. Also for both the
companies, there are strong returns of asset and that indicates the loyal base in the case of
customers. Also, the return on the common equity shows another important portfolio ratio
which in turn justifies the earning success for the given capital investments that also
includes the shareholders. Also, the average percentage of portfolio measure for Dell is
41.89% which also indicates that this company is more attractive to invest (Infront
Analytics, 2018).
Formula to calculate the ratio: ROA = (Operating Income/ Average Total Assets)
= [3012/ (47540+ 44533+38599+33652+26500)/5]
= [3012 / 38164.8)] = 7.89%
2.3 OPERATING PERFORMANCE
Profit margin ratio: for the company Dell, it is the gross profit margin with an average of
19.52% and that indicates that a lower operating profit margin as the involvement of
higher selling percentage, along with general and administrative expenses. (Fusion Media
Limited., 2018).
Formula to calculate the gross profit margin= [Gross margin / Net Sales revenues]
= [12186 / 56940] = 21.40 % (year 2014)
Similarly, for 2013, gross profit margin = 22.25%
For 2012, gross profit margin= 18.53%
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For 2011, gross profit margin = 17.51%
For 2010, gross profit margin = 17.93 %
Average of above 5 years, gross profit margin= 19.52%
2.4 ASSET TURNOVER AND THE INVENTORY TURNOVER
For Dell the asset turnover in five consecutive years (Appendix 1-3) becomes 1.20 and also the
Inventory Turnover becomes 32.38. This high value of inventory indicates Dell has a powerful
inventory management so that it would not have any issue of debt (MorningStar, 2017).
Formula to calculate Asset Turnover Ratio= Sales revenues / Total assets = 56940/ 47540 = 1.20
times (for 2014)
Also, Inventory Turnover = Cos of Sales / Inventory = 44754 / 1382 = 32.38 % (in 2014)
2.5 BACK DEBT RATIO
For Dell the debt equity ratio or the back date ratio is 48.99 due to their long term debts
of 15.60 million USD where there is the equity valuation of 26 million USD.
Formula to calculate Debt/ Equity Ratio= 5242 / 10701 = 48.99% (for year 2014)
CHAPTER 3 CONCLUSIONS AND RECOMMENDATIONS
3.1 CONCLUSIONS
It is thus concluded from the financial analysis of Dell for attracting the customer all through the
latest fastest along with the greatest products. Because of the economic recession in the year of
2008, Dell has to setback the shares as it has been affected the area of sales along with the
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investment. Also, the downturn has been highlighted with the ability for acquiring other
companies and also it will extend its asset to each market in different countries. Thereby, the
growth strategy for Dell has been analyzed for the engagement in receiving more number of
customers throughout the world within the new distribution channels. Thus Dell sale has to be
continued with a large number in order to give more focuses on the system in the case to able with
the increment within the traditional sales.
3.2 RECOMMENDATIONS
Dell has to increase in their research and development to meet the gain more in case of the
engineering to the sales percentage. So it is being difficult for Dell in order to rely only on the
cheapest product offer as they always believe and use the new technology to come up with quality
products. It is thus needed to rethinking about the price areas where they belong with a strong
capability and thus they would not try for everyone. Within the retailing segment of Dell, it has
been recommended to rethink to push the product into the retail store more than to hold them
within the home inventory (Abbey, Meloy, Blackburn, & Guide Jr, 2015).
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REFERENCE LIST
Abbey, J. D., Meloy, M. G., Blackburn, J., & Guide Jr, V. D. (2015). Consumer markets for
remanufactured and refurbished products. California Management Review,, 26-42.
Cordella, T., Dell’Ariccia, G., & Marquez, R. (2018). Government Guarantees, Transparency, and
Bank Risk Taking. IMF Economic Review, 116-143.
Dell Technologies. (2018). Investor Relations. Retrieved from
https://investors.delltechnologies.com: https://investors.delltechnologies.com/investor-
overview
Dell'Era, C., Landoni, P., & Verganti, R. (2015). From creative individuals to creative capital:
value creation and appropriation strategies of creative knowledge-intensive business
services. . International Journal of Innovation Management, 1550016.
Fusion Media Limited. (2018). Dell Technologies Inc (DVMT). Retrieved from
https://in.investing.com: https://in.investing.com/equities/dell-inc-ratios
Infront Analytics. (2018). Ratios valuation of Dell Inc ( DELL | USA). Retrieved from
https://www.infrontanalytics.com:
https://www.infrontanalytics.com/fe-EN/30275NU/Dell-Inc/financial-ratios
Kotler, P. (2015). Framework for marketing management. New York, USA: Pearson .
MorningStar. (2017). Dell Inc DELL . Retrieved from http://financials.morningstar.com:
http://financials.morningstar.com/direct/ratios/r.html?
t=XNAS:DELL&region=usa&culture=en-US&productcode=MLE&cur=
Pollard, D., Chuo, S., & Lee, B. (2016). Strategies for mass customization. . Journal of Business
& Economics Research (Online), 101.
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PR Newswire Association LLC. (2017). Dell Technologies Reports Fiscal Year 2017 Fourth
Quarter and Full Year Financial Results. Retrieved from https://www.prnewswire.com/:
https://www.prnewswire.com/news-releases/dell-technologies-reports-fiscal-year-2017-
fourth-quarter-and-full-year-financial-results-300431802.html
Saebi, T., & Foss, N. J. (2015). Business models for open innovation: Matching heterogeneous
open innovation strategies with business model dimensions. European Management
Journal, 201-213.
Stark, J. (2015). Product lifecycle management. In Product Lifecycle Management . New York,
USA: Springer, Cham.
Weinstein, A., & Winston, W. (2016). Defining your market: winning strategies for high-tech,
industrial, and service firms. Abingdon, UK: Routledge.
APPENDICES
APPENDIX 1
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APPENDIX 2
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APPENDIX 3
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