Financial Analysis Report: Comparing Dell and HP's Performance

This report presents a detailed financial performance analysis of Dell and its competitor, HP. The analysis encompasses several crucial financial ratios, including asset turnover, accounts receivable turnover, inventory turnover, current ratio, quick ratio, total debt to equity ratio, financing debt to equity ratio, and gross operating cycle. The study utilizes publicly available financial data, specifically form 10-K reports, to evaluate and compare the financial health and efficiency of both companies over several years. The report highlights Dell's performance in these key areas, comparing it with HP's results to determine market positioning and financial strengths and weaknesses. The findings reveal insights into each company's operational efficiency, liquidity, and financial leverage, offering a comprehensive overview of their financial standing in the market. The report concludes with a comparative assessment, summarizing the relative strengths and areas for improvement for both Dell and HP based on the financial data analyzed.

Assessment

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Analysis of the firm that is Dell’s financing performance by evaluating various aspects and
also of its competitor that is HP...................................................................................................1
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Financial performance is one of the most crucial as well as critical aspects as it helps to analyse
the performance of the finances of a firm so that necessary rectifications could be made so as to
improve the efficiency and effectiveness of the company (Hifni, 2017). In this report there is a
detailed description of a firm named Dell which is an American multinational company that is
established since a pretty long time and thus has captured a larger share of market too. Apart
from this the report also covers analysis and evaluation of various ratios and other aspects about
the firm that possess a lot of importance from the firm’s point of view and it is done on the basis
of publicly traded company's form 10-K which is a report that is of comprehensive nature that is
filed annually by the public companies regarding performance of the firm financially. Further the
firm’s competitor that is Hewlett-Packard (HP) financial performance is also analysed.
MAIN BODY
Analysis of the firm that is Dell’s financing performance by evaluating various aspects and also
of its competitor that is HP
 Asset Turnover Ratio- It is one of the most important aspects as it helps to determine
the value of the total assets of the firm on the basis of its sales and helps the firm to
analyse and evaluate various aspects and loop holes in which it is not performing as per
its expectations. It is good for a company if its asset turnover ratio is around 4 times as it
indicates that the business is generating a good amount of sales and subsequently profits.
Dell
Particulars 2016 2017 2018 2019 2020
Sales $50,911 $62,164 $79,040 $90,621 $92,154
Average Total Assets $46657 $81664 $121199.5 $118006.5 $115340.5
Asset Turnover Ratio = Sales/Average
Total Assets 1.091176 0.761217 0.652148 0.767932 0.798973
HP
Particulars 2019
Sales $58756

Average Total Assets $34041
Asset Turnover Ratio = Sales/Average Total Assets 1.726036
From the above it can be clearly seen that Dell is far better placed in the market as compared
to its competitor that is HP and has done exceptionally well in all the years that is in all the years
the sales of the firm is increasing with a good rate and was much above than HP in the year 2019
that was almost $32000(About financial reporting and performance of Dell, 2016).
 Accounts Receivables Turnover Ratio- It is a ratio that helps in determining the
efficiency of the firm and also helps in identifying the problems that the business is
facing so that necessary and appropriate measures can be taken in order to solve that
issue so that firm can be profitable in the long run and stand ahead of all other
competitors that are prevailing in the similar industry. It is preferable at lower side which
means that the firm is collecting the due amount from its debtors in a quick time and thus
it helps in the cycle and the amount can be further invested while if it is higher than the
amount is struck in the market for a longer period of time and that is not at all beneficial
for any firm in any industry.
Dell
Particulars 2016 2017 2018 2019 2020
Average Accounts Receivables $4850 $7153.5 $10570.5 $12046 $12427.5
Net Sales $50,911 $62,164 $79,040 $90,621 $92,154
Accounts Receivable Turnover (days) =
Average Accounts Receivable/Net Sales*365 34.77146 42.00224 48.81367 48.51844 49.22236
HP
Particulars 2019
Average Accounts Receivables $8471
Net Sales $58756
Accounts Receivable Turnover (days) = Average Accounts Receivable/Net
Sales*365 52.62297

In all the aspects Dell Company is much better than HP and it can be seen from the above
too as it has done very well in all the subsequent years as its accounts receivable have increased
at a constant rate and both the aspects that is sales and average receivables of Dell was much
higher than that of HP (About financial reporting and performance of Dell, 2017).
 Inventory Turnover Ratio- It is a very important ratio as it helps in determining the
inventory that has been sold by the firm by comparing it with sales so that a clear and true
picture can be analysed through it which can further help the business to develop and
grow much more than it is at the current time. It is preferable at a higher side as a higher
inventory turnover ratio shows that the product and services of the firm is in demand and
thus it is very crucial in analysing the product or services that has to be made in
accordance with this ratio. All firms in the industry try to increase as well as improve this
aspect but only a few companies are able to do that with sheer dedication towards the
market.
Dell
Particulars 2016 2017 2018 2019 2020
Average Inventory $1597 $2078.5 $2608 $3163.5 $3465
Cost of Goods Sold $42524 $48515 $58503 $65568 $63221
Inventory Turnover (days) = Average
Inventory/Cost of Goods Sold*365 13.70767 15.63748 16.2713 17.61038 2.000448
HP
Particulars 2019
Average Inventory $5898
Cost of Goods Sold $47,586
Inventory Turnover (days) = Average Inventory/Cost of Goods Sold*365 45.23957
Inventory turnover of Dell is also far better than of HP which can be seen from the above
too that cost of goods sold by Dell company was much higher than that of HP in the year 2019 as
it was almost $20000 more (About financial reporting and performance of Dell, 2018).
 Current Ratio- It is one of the most important ratios though it very easy to analyse and
interpret it possesses a lot of value for each and every firm irrespective of the industry in

which it is operating. This ratio helps in evaluating the liquidity of the firm and that too
of short term nature as it defines the capability of the firm’s current assets to pay off its
current liabilities. It is an essential tool in analysing and interpreting various aspects that
other ratios does not determine. The ideal current ratio is 2 times which means that the
company’s assets are two times of its liabilities all of current nature.
Dell
Particulars 2016 2017 2018 2019 2020
Current Assets $23,573 $30,773 $40,328 $36,138 $36,868
Current Liabilities $25310 $38,135 $45,839 $44,972 $52,456
Current Ratio = Current
Assets/Current Liabilities 0.931371 0.806949 0.879775 0.803567 0.702837
HP
Particulars 2019
Current Assets $20,177
Current Liabilities $25,293
Current Ratio = Current Assets/Current Liabilities 0.797731
Dell’s current ratio is not much better but still it is much better placed that that of HP as it
can be seen from the above too that though the current ratio of Dell company is going down
excluding the year 2018 but it is still far better than that of HP in the year 2019 (About financial
reporting and performance of Dell, 2019).
 Quick Ratio- This ratio is one of the parts of the above ratio as it also measures and
evaluates short term paying capacity of the business which is very crucial in determining
the track on which the firm would move in the future and thus it has to be given equal
importance like others. Its ideal ratio is 1.5:1 that means that the quick assets are one and
half times of its current liabilities and thus it determines the value of the business. While
in quick assets there are current assets excluding stock and prepaid expenses of the firm
(Smith, 2020).
Dell

Particulars 2016 2017 2018 2019 2020
Cash, Cash Equivalents + Short Term
Investments + Accounts Receivable $21440 $27385 $36634 $31694 $32702
Current Liabilities $25310 $38,135 $45,839 $44,972 $52,456
Quick Ratio = Cash, Cash Equivalents +
Short Term Investments + Accounts
Receivable/Current Liabilities 0.847096 0.718107 0.799188 0.70475 0.623418
HP
Particulars 2019
Cash, Cash Equivalents + Short Term Investments + Accounts Receivable $14443
Current Liabilities $25,293
Quick Ratio = Cash, Cash Equivalents + Short Term Investments + Accounts
Receivable/Current Liabilities 0.571028
Dell is not doing well in this aspect but still it is managing to perform well as compared to its
competitor as its quick ratio is declining in most of the year still it managed to get it above than
that of HP in the year that is of 2019 (About financial reporting and performance of Dell, 2020).
 Total Debt to Equity Ratio- It is a ratio that is very beneficial in identifying the true and
fair view of the company’s balance sheet so that it can prove helpful in detailed analysis
and evaluation of various other factors that are very important from the firm’s point of
view. It is very important for each and every firm to keep a tab on this aspect as it has the
potential to increase and improve the profitability and growth of the business while at the
same time it can also prove adverse for the company if it is not analysed and evaluated in
an accurate and precise manner (Nalukenge, Tauringana and Ntayi, 2017).
Dell
Particulars 2016 2017 2018 2019 2020
Total Liabilities $43,550 $98,966 $1,06,324 $1,11,566 $1,15,077
Shareholder's Equity $1,572 $13,474 $12,103 $-4,569 $-945
Total Debt to Equity = Total
Liabilities/Shareholder’s Equity 27.70356 7.344961 8.784929 -24.418 -121.775
HP
Particulars 2019

Total Liabilities $34,660
Shareholder's Equity $5850
Total Debt to Equity = Total Liabilities/Shareholder’s Equity 5.924786
Dell has performed poorly in this aspect and its competitor that is HP has performed well
in this regard that can be seen from the above table and thus it can be seen that the firm HP has
surpassed Dell in this aspect as it has performed exceptionally well in 2019.
 Financing Debt to Equity Ratio- It is one of the most important aspect as it helps in
determining, analysing, and then evaluating aspects of a firm that are related with most
essential factors of a company that is its liabilities and equity. In it liabilities are
compared with the owner’s fund or it can be said as shareholder’s fund so that it can be
analysed in detail about the financial position of the firm that can prove very beneficial in
the long run as well as in increasing profitability and growth which compromises most
important as well as essential aspects for a business (Njowa and Musingwini, 2018).
Dell
Particulars 2016 2017 2018 2019 2020
Financing Liabilities $12,881 $14,422 $18,334 $19,213 $20,065
Shareholder's Equity $1,572 $13,474 $12,103 $-4,569 $-945
Financing Debt to Equity = Financing
Liabilities/Shareholder’s Equity 8.19402 1.070358 1.514831 -4.20508 -21.2328
HP
Particulars 2019
Financing Liabilities $14783
Shareholder's Equity $5850
Financing Debt to Equity = Financing Liabilities/Shareholder’s Equity 2.527009
In this aspect too HP has done a commendable job as compared to Dell and the firm have to
take serious steps to solve these problems as soon as possible. The firm that is Dell is once again
behind of HP in this aspect it has performed poorly in the market and as a result HP has taken the

lead which can be seen in the year of 2019 and it have to take appropriate measures otherwise it
can cause very harm to the firm.
 Gross Operating Cycle- It is the most important, crucial, as well as critical aspect as it
determines the most important factor that is the operating cycle of the firm which possess
a lot of importance for each and every company irrespective of the industry in which it is
doing its business. It can be calculated easily by combining two aspects that is accounts
receivable turnover and inventory turnover and thus it is said to be the most valuable as
compared to others because of the value that it carry in each and every market (Noaman,
Ouda and Christiaens, 2018).
Dell
Particulars 2016 2017 2018 2019 2020
Accounts Receivable Turnover 34.77146 42.00224 48.81367 48.51844 49.22236
Inventory Turnover 13.70767 15.63748 16.2713 17.61038 2.000448
Gross Operating Cycle = AR Turnover
+ Inventory Turnover 48.47913 57.63973 65.08497 66.12883 51.22281
HP
Particulars 2019
Accounts Receivable Turnover $52.62297
Inventory Turnover $45.23957
Gross Operating Cycle = AR Turnover + Inventory Turnover 97.86254
Dell is though not performing well in some areas but has improved its performance in
this aspect as compared to its rival firm HP as it has managed to keep it gross operating cycle
days below which means that it is recovering amount that is struck in the market and that too
much quicker than HP that is almost 30 days quicker.
 Accounts Payable Turnover Ratio- It is a ratio that helps in determining the time period
that is taken by firm to recover the amount from its creditors and it is a very important
aspect as a whole. It is preferable at a higher side that means the amount is with the
company for a longer period of time and can be used in different ways that can produce a

lot of return as compared to a lower period that means the amount is not possessed by a
firm for a longer period of time (Ouma, 2017).
Dell
Particulars 2016 2017 2018 2019 2020
Average Accounts Payable $12548 $13651.5 $16378 $18773.5 $19639
Purchases $55641 $71891 $85325 $93157 $98624
Accounts Payable Turnover = Average
Accounts Payable/Purchases*365 82.31376 69.31045 70.06118 73.55676 72.68246
HP
Particulars 2019
Average Accounts Payable $14804.5
Purchases $62456
Accounts Payable Turnover = Average Accounts Payable/Purchases*365 86.51919
From the above it can be seen that in this area too Dell have surpassed its competitor firm HP
which is a good sign for the firm and in the year 2019 the difference was almost 13 years which
is a good margin and it can help the firm to grow and prosper in the long run.(About financial
reporting and performance of HP, 2019).
CONCLUSION
Financial performance and reporting is one of the most important as well as crucial aspect as
it helps to recognise the loop holes in the business so as to improve it in the future so that the
firm can sustain in the market for a longer period of time and that too profitable in the industry in
which it operates. From the above it can be concluded that Dell company is placed much better
than its arch rival HP, though the firm has to focus on some areas but still it is far profitable than
other firms operating in the similar industries.

REFERENCES
Books and journals
Hifni, S., 2017. Antecedent Factors in the Implementation of Accounting System and
Performance of Information System (A Case in Readiness to Success Accrual Base of
Financial Reporting in South Kalimantan–Indonesia). International Journal of Finance
and Accounting 2017. pp.19-36.
Nalukenge, I., Tauringana, V. and Ntayi, J. M., 2017. Corporate governance and internal controls
over financial reporting in Ugandan MFIs. Journal of Accounting in Emerging
Economies.
Njowa, G. and Musingwini, C., 2018. A framework for interfacing mineral asset valuation and
financial reporting. Resources Policy. 56. pp.3-15.
Noaman, N., Ouda, H. and Christiaens, J., 2018. Indexing financial reporting information for
heritage management. Economics and Management.
Ouma, V., 2017. The relationship between reporting quality and financial performance of
companies listed at Nairobi Securities Exchange (Doctoral dissertation, University of
Nairobi).
Smith, P., 2020. ‘The real effects of financial reporting on pay and incentives’–a practitioner
view. Accounting and Business Research. 50(5). pp.470-473.
Online:
About financial reporting and performance of Dell, 2016 [online]
Available through
https://www.annualreports.com/HostedData/AnnualReportArchive/m/NYSE_Dell_2016.pdf
About financial reporting and performance of Dell, 2017 [online]
Available through
https://www.annualreports.com/HostedData/AnnualReportArchive/m/NYSE_ Dell _2017.pdf
About financial reporting and performance of Dell, 2018 [online]
Available through
https://www.annualreports.com/HostedData/AnnualReportArchive/m/NYSE_ Dell _2018.pdf
About financial reporting and performance of Dell, 2019 [online]
Available through
https://www.annualreports.com/HostedData/AnnualReportArchive/m/NYSE_ Dell _2019.pdf

About financial reporting and performance of Dell, 2020 [online]
Available through
https://www.annualreports.com/HostedData/AnnualReportArchive/m/NYSE_ Dell _2020.pdf
About financial reporting and performance of HP, 2019 [online]
Available through
https://www.annualreports.com/HostedData/AnnualReportArchive/m/NYSE_ HP _2019.pdf