Executive Tools for Decision Making



Executive Tools for Decision Making

Introduction

The Financial analysis of financial statement of companies help in evaluating the weakness, appropriateness and efficiency of business or a project. It is conducted by computing financial ratios, and analyzing financial statements that reflect the current financial performance of the company and helps in conducting comparative analysis of the company with respect to industry and other key players in the market. It provides several financial trends of the company and highlights its strengths and weaknesses, which further help in making executive decisions for the business. For instance which projects should be continued or terminated, additional debt should be taken or equity should be raised. These tools facilitate companies to examine and gauge profitability, liquidity, operations and efficiency in managing assets and liabilities.

Discussion

Dell Inc.

Liquidity

The liquidity ratio of Dell Inc. exhibits an increasing trend for a longer time period but it has decreased from 1.49 to 1.34 in 2012. The decrease can be explained by greater increase in current liabilities from 19,483 to 22,001 in 2012, as compare to current assets i.e. from 29,021 to 29,448 during 2012. Increase in assets is mainly because of increased inventories solely. The increase in liabilities was due to increased short term debt on account of purchasing inventories during 2012 (Dell Inc., 2012).

Investments in Operations

Dell Inc. has increased its investments in operations as per cash out flow from investing activities for the three years time period i.e. $6166 million in 2012, $1165 million in 2011 and $3809 million in 2010. The increase in investments is mainly seen in form of increased purchases in 2012 of $4656 million and increased capital expenditure of $675 (Dell Inc., 2012).

Operations of company

The net income for the company has been increasing for the past three years as evident from net income ...