Analysis of liquidity and profitability measures of Dell Inc. The following data (amounts in millions) are taken from the January 30, 2009, and February 1, 2008, comparative financial statements of Dell Inc., a direct marketer and distributor of personal computers (PCs) and PC-related products:
DELL INC. Consolidated Statements of Income |
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Fiscal Year Ended | ||
| January 30, | February 1, |
| 2009 | 2008 |
Net revenue | $61,101 | $61,133 |
Cost of net revenue | 50,144 | 49,462 |
Gross margin | 10,957 | 11,671 |
Operating expenses: |
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Selling, general, and administrative | 7,102 | 7,538 |
Research, development, and engineering | 665 | 693 |
Total operating expenses | 7,767 | 8,231 |
Operating income | 3,190 | 3,440 |
Investment and other income, net | 134 | 387 |
Income before income taxes | 3,324 | 3,827 |
Income tax provision | 846 | 880 |
Net income | $ 2,478 | $ 2,947 |
DELL INC. Consolidated Statements of Financial Position | |||
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| January 30, | February 1, |
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| 2009 | 2008 |
| Assets |
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Current assets: |
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Cash and cash equivalents |
| $ 8,352 | $ 7,764 |
Short-term investments |
| 740 | 208 |
Accounts receivable, net |
| 4,731 | 5,961 |
Financing receivables, net |
| 1,712 | 1,732 |
Inventories, net |
| 867 | 1,180 |
Other current assets |
| 3,749 | 3,035 |
Total current assets |
| 20,151 | 19,880 |
Property, plant, and equipment, net |
| 2,277 | 2,668 |
Investments |
| 454 | 1,560 |
Long-term financing receivables, net |
| 500 | 407 |
Goodwill |
| 1,737 | 1,648 |
Purchased intangible assets, net |
| 724 | 780 |
Other noncurrent assets |
| 657 | 618 |
Total assets |
| $ 26,500 | $ 27,561 |
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| (continued) |
(concluded) |
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| January 30, | February 1, |
| 2009 | 2008 |
Liabilities and Equity |
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Current liabilities: |
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Short-term debt | $ 113 | $ 225 |
Accounts payable | 8,309 | 11,492 |
Accrued and other | 3,788 | 4,323 |
Short-term deferred service revenue | 2,649 | 2,486 |
Total current liabilities | 14,859 | 18,526 |
Long-term debt | 1,898 | 362 |
Long-term deferred service revenue | 3,000 | 2,774 |
Other noncurrent liabilities | 2,472 | 2,070 |
Total liabilities | 22,229 | 23,732 |
Stockholders’ equity: |
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Common stock and capital in excess of $.01 par value; |
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shares authorized: 7,000; shares issued: 3,338 and |
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3,320, respectively | 11,189 | 10,683 |
Treasury stock, at cost; 919 and 785 shares, respectively | (27,904) | (25,037) |
Retained earnings | 20,677 | 18,199 |
Accumulated other comprehensive income (loss) | (309) | (16) |
Total stockholders’ equity | 4,271 | 3,829 |
Total liabilities and equity | $26,500 | $27,561 |
At February 2, 2007, total assets were $25,635 and total stockholders’ equity was
$4,328.
a.Calculate Dell, Inc.’s, working capital, current ratio, and acid-test ratio at January 30, 2009, and February 1, 2008. Round your ratio answers to two decimal places.
b. Calculate Dell’s ROE for the years ended January 30, 2009, and February 1, 2008. Round your ratio answers to two decimal places, and your percentage answers to one decimal place.
c. Calculate Dell’s ROI, showing margin and turnover, for the years ended January 30, 2009, and February 1, 2008. Round your ratio answers to two decimal places and your percentage answers to one decimal place.
d. Evaluate the company’s overall liquidity and profitability.
e. Dell, Inc., did not declare or pay any dividends during the years ended January 30, 2009, or February 1, 2008. What do you suppose is the primary reason for this?
Optional continuation of Case 3.18—trend analysis
The following historical data were derived from Dell, Inc.’s, consolidated financial
statements (in millions).
Note: Past data are not necessarily indicative of the results of future operations.
| 2009 | 2008 | 2007 | 2006 | 2005 |
Net revenues | $61,101 | $61,133 | $57,420 | $55,788 | $49,121 |
Net income | 2,478 | 2,947 | 2,583 | 3,602 | 3,018 |
Total assets | 26,500 | 27,561 | 25,635 | 23,252 | 23,318 |
Long-term debt | 1,898 | 362 | 569 | 625 | 662 |
f.Are the trends expressed in these data generally consistent with each other?
g. In your opinion, which of these trends would be most meaningful to a potential investor in common stock of Dell, Inc.? Which trend would be least meaningful?
h. What other data (trend or otherwise) would you like to have access to before making an investment in Dell, Inc.?
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