Dell: Analyzing financial statement
- Dell's overview
- Obtain outside information about the company and its industry. Include the following information in your group presentation
- Describe four or five key business risks related to the client's business and industry
- What notable accounting considerations are there for companies in this industry?
- What legal or regulatory matters are of concern for the company and its industry?
- Analyze the company's financial strength
- After analyzing the financial statements and key risks, please answer the following questions
- Would you but this company's stock? Why or Why Not?
- Would you work for this company based upon its financial performance? Why or Why Not?
- If you were a banker would you lend money to this company? Why or Why Not?
products, from desktop personal computers (PC) to peripherals. Founded in 1984 in Texas by then-student Michael Dell, the company was as of January 2012 the third largest PC vendor in the world . Conducting its business worldwide through numerous subsidiaries, Dell provides IT solutions and services delivered directly by Dell, through its famous feature of direct-sales model and configure-to-order approach manufacturing, establishing a direct link with the final customers. Dell also uses other distribution channels such as retailers, third-party solution providers, system integrator's, and third-party reseller's.
Its business segments are divided between: large enterprises, public (meaning educational institutions, government, health care?), small and medium business, consumer (meaning individuals).Dell's main activity consists of assembling PC components and parts manufactured by third-party suppliers, as is the majority of the client products sold under Dell's brand name. These suppliers provide Dell with all the necessary components such as: the motherboard, the graphic card, the screen, processors? Dell's manufacturing process consists of assembly, software installation and functional testing.
To ensure quality to the final customer, all components, parts, sub-assemblies and systems obtained from third-party suppliers must take a quality control test to assess their conformity with Dell's good manufacturing process.
[...] 12 b. How is the financial strength likely to change in the next year or so? 12 c. What is the quality of earnings? (i.e. How does the company compare with others in the industry?) After Analyzing the Financial Statements and Key Risks, please answer the following questions: 13 a. Would you but this company's stock? Why or Why Not? 13 b. Would you work for this company based upon its financial performance? Why or Why Not? 13 c. [...]
[...] The interesting point that we will discuss further, is that those raw materials are purchased from a large number of vendors. Depending on the product, multiple sources are not always available, forcing Dell to rely on single-source vendors, which may constitute a risk factor. d. How large is DELL in terms of sales, assets, and employees? Regarding sales, the company recorded revenues of $62,071 million during the fiscal year that ended in February 2012 (fiscal year 2012), which corresponds to an increase of over fiscal year 2011. [...]
[...] Debt ratios measure financial leverage. Debt ratio: total liabilities/total assets 35616/44533= 0.8 Dell has more assets than debts. Long term debt to equity: long term debt/total assets 6387/44533= 0.14 This ratio enters in the average of personal computer manufacturer generally under which means that Dell had not been aggressive in financing its growth with debts. Market ratios Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. Earnings per share: expected earnings/number of shares = 1.90 Payout ratio: Dell has never paid cash dividends Price to earnings ratio: market price per share/diluted EPS 17.6 / 1.88 = 9.36 Quality of income: 2012 = cash flow from operating activities / net income = 5527/3492= 1.58 The ratio is more than 1. [...]
[...] and the importance of developing countries: U.S market is quite saturated. Emerging countries are the future business of this industry. Level of life growth in these countries will raise the demand. Manufactories have to position themselves on these markets to catch future consumer attention and build a strong brand identity Sales places' accessibility: Computers are a matter of quality and the high prices of those devices means a lot to the customers. Advices from experts and guidance in the act of buying are services that must be attached to the sales places. [...]
[...] What are the five or six most important factors for success in this business? Describe four or five key business risks related to the client's business and industry What notable accounting considerations are there for companies in this industry? What legal or regulatory matters are of concern for the company and its industry? Analyze the company's financial strength: 9 Profitability Ratios 9 Liquidity ratios 10 Activity ratios 11 Debt ratios 11 Market ratios 11 a. Assess the financial strength of the company? [...]