FINANCIAL ASSIGNMENT

Financial Assignment



Financial Assignment

Task I

Company Overview

The computer commerce has become one of the most competitive industries in the world. With expertise growing at astonishing strides, numerous of the computer businesses have dropped behind and even out of the industry since the development of the computer. Only the strongest businesses have been adept to be profitadept and efficient. Dell Computer Corporation is one of the few corporations to be able to remain at the top of the market. Although Dell is not known for innovation, the company has started to think outside the box (Hoover's online).

Ratio Analysis

It is quite evident that Dell is tough to beat if one is looking for stable earnings growth, excellent fundamentals and compelling valuations. It is an excellent proxy to the economic growth in America.

As the government regulates margins for retail companies, it is expected that the major determinant of value for Dell will be the company's ability to sell additional products. It is hence important to evaluate Dell use of capital to determine if:

The company earns an adequate rate of return, and

Existing returns are sustainable or otherwise

As the quality of any franchise is reflected in a consistent ability to earn above average returns, I have evaluated Dell on this criterion as well, trying my hands at calculating EVA - Expected Value Added Analysis spreads for Dell from 2002 onwards. EVA is a way of measuring real corporate profits, that is, profits after taking into account the cost of all capital including equity.

Profitability Ratios

01/29/2010

01/30/2009

ROA % (Net)

4.78

9.19

ROE % (Net)

28.99

61.35

ROI % (Operating)

27.22

59.8

EBITDA Margin %

5.61

6.65

Calculated Tax Rate %

29.2

25.45

Revenue per Employee

552,576

776,538

Liquidity Ratios

01/29/2010

01/30/2009

Quick Ratio

1.03

1.05

Current Ratio

1.28

1.36

Net Current Assets % TA

15.7

19.97

Debt Management

01/29/2010

01/30/2009

LT Debt to Equity

0.61

0.44

Total Debt to Equity

0.72

0.47

Interest Coverage

23.87

-

Asset Management

01/29/2010

01/30/2009

Total Asset Turnover

1.76

2.27

Receivables Turnover

7.08

8.67

Inventory Turnover

45.51

48.99

Accounts Payable Turnover

5.39

6.19

Accrued Expenses Turnover

32.65

35.37

Property Plant & Equip Turnover

23.8

24.78

Cash & Equivalents Turnover

5.59

7.6

Per Share

01/29/2010

01/30/2009

Cash Flow per Share

2

0.96

Book Value per Share

2.88

2.2

The Current Ratio compares the liquid assets (that is, cash and those assets held that will soon be turned into cash) of the business with the current liabilities. The Quick Ratio is very similar to the current ratio, but it represents a more stringent test of liquidity. From the data of liquidity ratios of Dell, we can see that Dell did well to get close to the perfect 2:1 in current ratio and 1:1 in quick ratio.

Dell Company's credit policy management did very well. The debtors days are within 30 days, but creditors days are double of the debtors days on average. It means that Dell company can hold cash for a long time to do what they want. It is the best result which every company want. The organization always want to hold cash the longer the better, because the money's current value is the best value.

Generally speaking, Dell did well in its financial management. But from the analysis above, we can see that: the Gross Profit percentage and the Current ratio are not good compare to others. In personal opinion, I think Dell may should strengthen market management to sale more productions and reduce the cost of sales, ...