Dell's Working Capital: Summary

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Dell’s Working Capital
Dell Computer Corporation was founded in 1984 by a nineteen years old guy whose name is Michel Dell. Dell started to market and sells its own product by free telephone line then shipping directly to the customers which is the core strategy of Dell for selling their products. They were advertising for their products in computer trade magazine then they make a catalog for their products. Dell was the first to provide toll-free telephone and on-site support for technical problems so he can differentiate in customer services. Problem Definition

Can Dell maintain a growth rate of 50% so it can beat the industry growth rate forecast? Also, how can we arrange the funding to support this growth rate? Assumption
I will assume most of the figures to be as it was in 1996 but I will mention some of the important figures here: 1.Dell will continue to operate with the same efficiency.
2.Gross margin will continue to be 20.1% of the sale.
3.Inventory level will continue at 10% to 20% of sale.
4.Cash and short term investment will be 12% as prior year. 5.Tax rate will continue at 30%.
We will use percentage of sale method to calculate the pro-forma Income Statement & Balance Sheet and as will be shown that the sales will increase by 33.33% to be $408 Million in 1997.

Pro-Forma Income Statement of Dell Computer Corporation
in Millions of Dollars
1997% of sale19961995
Sales7,944 5,2963,475
Cost of Sales6,34379.9%4,2292,737
Gross Margin 1,601 1,067738
Operating Expense 1,03513.0%690489
Operating Income 566 377249
Financing & Other90.1%6-36
Income Taxes16730.0%11164
Net Profit408 272149
Pro-Forma Balance Sheet of Dell Computer Corporation
in Millions of Dollars
1997% of sale19961995
Current Assets
Cash 831.0%5543
Short Term Investments88711.2%591484
Accounts Receivables, net1,08913.7%726538
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