1. Assessment of Dell’s performance.
Looking over Dell’s financial statements many things are evident. Revenues have shown a steady increase over the past 5 years, with a most recent increase of 6.5% in 2008. Gross profit margins have steadily increased at about 18% over the past 5 years with net profit margins steadily increasing around 5%. This concludes that Dell is efficiently operating enough to recover not only the cost of the product but the cost of operating expenses and the cost of debt.
Comparing Dell’s current assets to its current liabilities, it is determined that Dell has a 1.07 current ratio. Having a ratio over 2.0 indicates that a company is not investing its assets ...view middle of the document...
Dell’s return on assets is currently at 10.7%, which means it is currently earning 10 cents for every dollar in assets. Looking at Dell’s asset turnover ratio we can conclude they produce a low profit margin product. Asset turnover simply compares the revenue to the assets. For every $1 in assets, the revenue turnover for Dell was $2.20.
2. Dell against competitors
In comparison to its competitors, Dell had the lowest percentage of revenue growth in 2007. Acer surpassed Dell in 2007 with 25.2% revenue growth. Apple’s net profit margin in 2007 outweighed its competitors at a 14.6% increase but Dell placed fair with a 4.5% net profit margin growth. Lenovo still maintained an increase in 2007 at 1.1%.
Dell may be at risk for not having enough cash to pay its bills over the next 12 months, Apple is at the opposite side of the spectrum with a current ratio at 2.0. This means Apple is in good financial stability but not investing its assets well. Dell is not the only company that cannot pay its current liabilities without being dependant on sale of inventory; Lenovo, Hewlett Packard (HP), and Acer are all in poor financial position to pay bills in case of an economic downfall.
The goal to having financial leverage is to have your debt at least 50% or less of the dollar amount of total assets. Unlike Dell, only two competitors are in an adequate financial position to maintain this ratio, which are Apple and HP. In regard to debt and equity, Apple has a debt to equity ratio at 1, which means they have no short borrowings or long term debt, whereas Dell is in the worst standing at a 4.77 ratio.
Dell is in the best standing when it comes to earning money for its investors with a 58.2% in 2007. The next closest competitor is Apple with a 24.1% return that year. Dell is close to top runner Apple in terms of return on assets. Dell competes well with its competitors in terms of return on assets. Dell earns 10 cents on every dollar of assets, where as Apple earns 13.8 cents. Next to Lenovo, Dell ranks well in asset turnover due to having a 2.2 turnover ratio. The higher a company’s asset turnover, the...