Financial Analysis of Dell Inc.



Financial Analysis of Dell Inc.

Introduction

Dell Inc. operates in computer technology industry. It produces a wide range of variety of products such as laptops, personal computers, networking products, portable devices, software, and associated devices and services. It mainly functions within USA and its head quarter is located in Texas. There are about 109,400 employees working in the company as per 2012 figures. There are around 2700 part time workers in the company. The company made a handful profit and sales during last year in 2012, which was calculated as $62,071 million and it is increased by 0.9% as compare to 2011. The operating profit that company made in the year 2012 was recorded as $4431 million and it is increased by 29.1% in 2011. The over all net profit was recorded as $3492 million during 2012 and it increased by 32.5% as compare to 2011.

Dell Inc. basically is engaged in designing, developing, manufacturing, marketing, selling, and supporting information technology related products and services. Its business is spread in America, Europe, Middle East, Asia, and other areas. It has mainly divided its market into regular customers, large companies, small and medium businesses, and market consumers. Its products can be categorized into software solutions for large companies, hardware products for consumers and companies along with peripheral devices.

Its products and services include networking products, and storage devices along with servers etc. In addition it also provides customized solutions.

The main strategy of the company revolves around alteration of products and items in its portfolio that aims to yield higher returns. It believes that in order to achieve its fundamental goal, it must continuously expand and offer variety of organizational solutions and associated services. Its main domain of growth are considered as data centers, information management and cloud computation. The company perceives to expand its operations in emerging countries in order to grab the growth opportunities. It aims at acquiring companies that hold profitable portfolios that comply with worldwide customer database and distribution activities (Takahashi, D., 2012).

Discussion

The financial ratio analysis of Dell inc. for three years is given below:

Ratios

2013

2011

2012

Current Ratio

1.19

1.49

1.34

Quick Ratio

1.13

1.26

1.12

Receivable Turnover

5.80

9.97

9.57

Inventory Turnover

32.13

42.60

35.68

Fixed Asset Turnover

23.75

29.75

30.45

Asset Turnover

1.76

1.70

1.49

Gross Profit Margin %

14%

18.53

22.25

Operating Profit Margin %

5%

5.58

7.14

Net Profit Margin %

4%

4.29

5.63

Return on Assets %

5%

7.29

8.40

Return on Equity %

-12%

39.31

41.86

Financial Leverage

1.82

4.97

4.99

Debt to Equity

0.78

0.66

0.72

Earnings Per share

1.06

1.35

1.88

Book Value Per Share

6.15

4.05

4.96

 

Table No. 1

Source: (Morningstar, 2012)

Liquidity Ratios

Liquidity ratios measure the company's capability to pay its debt commitment in time (Fraser. L. M. and Orimiston. A. 2007). We have measured two ratios of liquidity to evaluate Dell Inc. ability to fulfill its debt obligations.

Current ration is the measures the company's capacity to fulfill its short term commitments, it is computed by dividing current liabilities to current assets (Fraser. L. M. and Orimiston. A. 2007). The current 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 ...