Dell's Working Capital

Harvard Business School Case #201-029

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Table A Days Supply of Inventory (DSI)a

1993b 1994b 1995b

Dell Computer 55 33 32

Apple Computer 52 85 54

Compaq Computer 72 60 73

IBM 64 57 48

Source: Dell Computer Corporation Fiscal 1993-1995 Annual Reports; case writer estimates from Apple Computer, Compaq
Computer, and IBM Fiscal 1992-1994 Annual Reports.
a
DSI = (Net Ending Inventory)/(Quarterly COGS/90 Days)
Dell’s fiscal calendar ends in January; Apple’s in September; Compaq and IBM’s in December. The DSI for 1995 represents
b

Dell’s DSI for the quarter ended on 1/29/95, Apple’s on 9/30/94, and Compaq’s and IBM’s on 12/31/94.
Exhibit 1 Dell’s annual worldwide sales dollar growth versus industry.

Calendar Year Della Industry

1991 63% -2% -3150.0%
1992 126% 7% 1800.0%
1993 43% 15% 286.7%
1994 21% 37% 56.8%
1995 52% 31% 167.7%

Source: Dell Computer Corporation Fiscal 1996 Annual Report; case writer estimates
from industry market share data from International Data Corporation.

a
Dell’s fiscal year closest in alignment to calendar year stated.
Exhibit 2 Working Capital Financial Ratios for Dell.

DSIa DSOb DPOc CCCd

Q193 40 54 46 48
Q293 44 51 55 40
Q393 47 52 51 48
Q493 55 54 53 56
Q194 55 58 56 57
Q294 41 53 43 51
Q394 33 53 45 41
Q494 33 50 42 41
Q195 32 53 45 40
Q295 35 49 44 40
Q395 35 50 46 39
Q495 32 47 44 35
Q196 34 47 42 39
Q296 36 50 43 43
Q396 37 49 43 43
Q496 31 42 33 40

Source: Dell Computer Corporation fiscal 1993-1996 annual and quarterly reports.
a
DSI (Days Sales of Inventory) = Net Inventory / (Quarterly COGS/90).
b
DSO (Days Sales Outstanding) = Net Accounts Receivables / (Quarterly Sales/90).
c
DPO (Days Payables Outstanding) = Accounts Payables / (Quarterly COGS/90).
d
CCC (Cash Conversion Cycle) = DSI + DSO – DPO.
Exhibit 3 Percent of Dell Computer Systems Sales by Microprocessor.

Computer Systems FY94 FY95 FY96

386 models 7% 0% 0%
486 models 92% 71% 25%
Pentium models 1% 29% 75%

Source: Dell Computer Corporation Fiscal 1994-96 Annual Reports.

Exhibit 4 Profit & Loss Statements for Dell Computer Corporation (millions of dollars).

Fiscal Year 1997 1996 1995 1994 1993 1992

50% 52% 21% 43% 126%
Sales $7,944 $5,296 $3,475 $2,873 $2,014 $890
Cost of Sales 6,300 4,229 2,737 2,440 1,565 608
Gross Margin 1,644 1,067 738 433 449 282
20.7% 20.1% 21.2% 15.1% 22.3% 31.7%
Operating Expenses 1076.438 690 489 472 310 215
13.6% 13.0% 14.1% 16.4% 15.4% 24.2%
Operating Income 567.3624 377 249 (39) 139 67
Financing & Other Income 0 6 (36) 0 4 7
Income Taxes 170.2087 111 64 (3) 41 23
Net Profit 397.1537 272 149 (36) 102 51
5% 5% 4% -1% 5% 6%

Source: Dell Computer Corporation Fiscal 1996 Annual Report.

Exhibit 5 Balance Sheets for Dell Computer Corporation (millions of dollars).

Year Ended
January 28, January 28, January 29,
1997e 1996 1995
Current Assets:
Cash 83 55 43
Short Term Investments 744 591 484
Accounts Receivables, net 1089 726 538
Inventories 644 429 293
Other 234 156 112
Total Current Assets 2793 1957 1470
Property, Plant & Equipment, net 269 179 117
Other 15 12 7
Total Assets 3076 2148 1594

Current Liabilities:
Accounts Payable 699 466 403
Accrued and Other Liabilities 710 473 349
Total Current Liabilities 1409 939 752
Long Term Debt 113 113 113
Other Liabilities 185 123 77
Total Liabilities 1706 1175 942
Stockholders’ Equity:
Preferred Stocka 6 6 120
Common Stocka 430 430 242
Retained Earnings 967 570 311
Other -33 -33 -21
Total Stockholders’ Equity 1370 973 652
3076 2148 1594

Source: Dell Computer Corporation Fiscal 1994-1996 Annual Reports.

a
1,190,000 shares of preferred stock converted to common stock in fiscal year 1996.

Razon CxC 0.137

Razon Inv 0.081
Razon CxP 0.088
Cash 0.010 0.012
Other 0.029 0.032
PPI 0.034 0.034
Accrued 0.089 0.100
Other 0.023 0.022

FLUJO DE CAJA - METODO INDIRECTO

Utilidad Neta 397 272

´+ Capital de trabajo -345 -261

Cuentas por cobrar -363 -188
Inventarios -215 -136
 Cuentas por pagar 233 63
Otros activos corrientes -78 -44
Provision de gastos y otros pasivos de corto plazo 237 124
Otros pasiovos de largo plazo 62 46
Flujo de Caja Operativo 273 137

Inversiones de corto plazo (Depositos) -153 -107

Inversiones en activo Fijo Neto -90 -62
Otras Inversiones -3 -5
Flujo de caja de Inversiones -245 -174

Deuda 0 0
Movimientos en el Patrimonio no identificados 49
Flujo de caja Financiero 0 49

Flujo de caja del periodo 28 12

Flujo de caja inicial 55 43

Flujo de caja final 83 55

USOS Y FUENTES

Usos
Operación
Inversiones 153 107
Activo Fijo 90 62
Otros activos 3 5
Caja 28 12
273 186

Fuentes
Deuda 0 49
Operación 273 137
273 186
ear Ended
January 30,
1994

3
334
411
220
80
1048
87
5
1140

538
100
31
669

NA
NA
NA
NA
471
1140

0.001
0.028
0.030

0.011