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Finance 450 at EMU with Dr. Moeller

Dell Computer Analysis
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Dell Computer – Working Capital

Substantive Issues

Dell Computer manufactures, sells, and services personal computers. The company markets directly to its customers and builds computers after receiving a customer order. This build-to-order model enables Dell to have much smaller investment in working capital than its competitors Dell has grown quickly and has been able to finance that growth internally by its efficient use of working capital and its profitability.

 

Pedagogical Objectives

The case highlights the benefits of effective working capital management in a rapidly growing firm. Dell’s working capital management can be analyzed using its financial statements together with information about the inventory policies of Dell and its competitors. The analysis should include:

1. Assessing Dell’s working capital competitive advantage.

2. Determining how Dell funded its fiscal 1996 sales growth, and

3. Evaluating Dell’s internal funding options for projected sales growth of 50% in fiscal 1997.

 

Questions to be answered

1. How was Dell’s working capital policy a competitive advantage?

2. How did Dell fund its 52% growth in 1996?

3. Assuming Dell sales will grow at 50% in 1997, how might the company fund this growth internally? Do you recommend internal funding for Dell at this point in its growth phase?