HP Inc. vs Dell Technologies Inc.

1
2
 HP Inc. vs Dell Technologies Inc.
By

Okasha Osama Paracha

53006

Umair Ahmed

53378

Saif Nasir

52932

Muneeb Khan

53822

Date: 03/ January / 2023

For Fulfilling Sessional Requirement for the course of

FINANCIAL MANAGEMENT

3
 TABLE OF CONTENTS

CHAPTER 1..............................................................................................................................................8
INTRODUCTION.................................................................................................................................8
CHAPTER 2..............................................................................................................................................9
1.1 Inventory Conversion Period........................................................................................................9
1.2 Receivable Collection Period........................................................................................................9
2.3 Payable Deferral Period................................................................................................................9
2.4 Cash Conversion Cycle................................................................................................................10
2.5 Average Daily Sales.....................................................................................................................10
2.6 Daily Sales Outstanding..............................................................................................................11
2.7 Receivables...................................................................................................................................11
CHAPTER 3............................................................................................................................................12
3.1 Short-term Solvency Measures.....................................................................................................12
3.1.1 Current Ratio = Current Assets ÷ Current Liabilities.........................................................12
3.1.2 Quick Ratio/ Acid Test Ratio = Current Assets – Inventory ÷ Current Liabilities...........12
3.1.3 Cash Ratio = Cash÷ Current Liabilities...............................................................................12
3.2 Long-term Solvency Measures......................................................................................................13
3.2.1 Debt Ratio = Total Assets – Total Equity ÷ Total Assets.....................................................13
3.2.2 Equity Ratio = Total Equity ÷ Total Assets..........................................................................13
3.2.3 Debt-Equity Ratio = Debt Ratio ÷ Equity Ratio...................................................................13
3.2.4 Times Interest Earned Ratio = EBIT ÷ Interest...................................................................14
3.2.5 Cash Coverage Ratio = EBIT + Depreciation and Amortization ÷ Interest.......................14
3.3 Asset Management or Turnover Ratio.........................................................................................14
3.3.1 Inventory Turnover = Cost of Goods Sold ÷ Inventory.......................................................14
3.3.2 Day Sales in Inventory = 365 ÷ Inventory Turnover...........................................................15
3.3.3 Receivable Turnover = Sales ÷ Receivables..........................................................................15
3.3.4 Day Sales in Receivables = 365 ÷ Receivables Turnover.....................................................15
3.3.5 Total Assets Turnover = Sales ÷ Total Assets.......................................................................15
3.4 Profitability Ratios........................................................................................................................15
3.4.1 Profit Margin = Net Income ÷ Sales......................................................................................16

4
 3.4.2 EBITDA Margin = EBITDA ÷ Sales.....................................................................................16
3.4.3 Return on Assets = Net Income ÷ Total Assets.....................................................................16
3.4.4 Return on Equity = Net Income Attributable to Shareholder ÷ Total Equity...................16
3.5 Market Value Ratios......................................................................................................................17
3.5.1 Earnings Per Share = Net Income Attributable to Shareholders ÷ Shares Outstanding. 17
3.5.2 Price to Earnings Ratio = Price Per Share ÷ Earnings Per Share......................................17
3.5.3 Market to Book Value = Market Value Per Share ÷ Book Value Per Share.....................17
3.5.4 Market Capitalization = Price Per Share × Shares Outstanding........................................17
CHAPTER 4............................................................................................................................................19
4.1 Inventory Conversion Period........................................................................................................19
4.2 Receivable Collection Period........................................................................................................19
4.3 Payable Deferral Period................................................................................................................19
4.4 Cash Conversion Cycle..................................................................................................................20
4.5 Average Daily Sales = Annual Sales ÷ 360...................................................................................20
4.6 Daily Sales Outstanding = Receivables ÷ Sales Per Day.............................................................20
4.7 Receivables = ADS × DSO............................................................................................................21
CHAPTER 5............................................................................................................................................22
5.1 Short-term Solvency Measures.....................................................................................................22
5.1.1 Current Ratio = Current Assets ÷ Current Liabilities.........................................................22
5.1.2 Quick Ratio/ Acid Test Ratio = Current Assets – Inventory ÷ Current Liabilities...........22
5.1.3 Cash Ratio = Cash ÷ Current Liabilities..............................................................................22
5.2 Long-term Solvency Measures......................................................................................................23
5.2.1 Debt Ratio = Total Assets – Total Equity ÷ Total Assets.....................................................23
5.2.2 Equity Ratio = Total Equity ÷ Total Assets..........................................................................23
5.2.3 Debt-Equity Ratio = Debt Ratio ÷ Equity Ratio...................................................................23
5.2.4 Times Interest Earned Ratio = EBIT ÷ Interest...................................................................24
5.2.5 Cash Coverage Ratio = EBIT + Depreciation and Amortization ÷ Interest.......................24
5.3 Asset Management or Turnover Ratio.........................................................................................24
5.3.1 Inventory Turnover = Cost of Goods Sold ÷ Inventory.......................................................24
5.3.2 Day Sales in Inventory = 365 ÷ Inventory Turnover...........................................................24
5.3.3 Receivable Turnover = Sales ÷ Receivables..........................................................................25
5.3.4 Day Sales in Receivables = 365 ÷ Receivables Turnover.....................................................25

5
 5.3.5 Total Assets Turnover = Sales ÷ Total Assets.......................................................................25
5.4 Profitability Ratios........................................................................................................................25
5.4.1 Profit Margin = Net Income ÷ Sales......................................................................................25
5.4.2 EBITDA Margin = EBITDA ÷ Sales.....................................................................................26
5.4.3 Return on Assets = Net Income ÷ Total Assets.....................................................................26
5.4.4 Return on Equity = Net Income Attributable to Shareholders ÷ Total Equity..................26
5.5 Market Value Ratios......................................................................................................................26
5.5.1 Earnings Per Share = Net Income Attributable to Shareholders ÷ Shares Outstanding. .26
5.5.2 Price to Earnings Ratio = Price Per Share ÷ Earnings Per Share......................................27
5.5.3 Market to Book Value = Market Value Per Share ÷ Book Value Per Share.....................27
5.5.4 Market Capitalization = Price Per share × Shares Outstanding........................................27
CHAPTER 6............................................................................................................................................28
6.1 Cash Conversion Cycle..................................................................................................................28
6.1.1 Inventory Conversion Period:................................................................................................28
6.1.2 Receivable Collection Period:................................................................................................28
6.1.3 Payable Deferral Period:........................................................................................................28
6.1.4 Cash Conversion Cycle:.............................................................................................................28
6.2 Average Daily Sales:......................................................................................................................28
6.3 Day Sales Outstanding:.................................................................................................................28
6.4 Receivables.....................................................................................................................................29
6.5 Short-term Solvency Measures.....................................................................................................29
6.5.1 Current Ratio..........................................................................................................................29
6.5.2 Quick Ratio/ Acid Test Ratio.................................................................................................29
6.5.3 Cash Ratio...............................................................................................................................29
6.6 Long-term Solvency Measures......................................................................................................29
6.6.1 Debt Ratio................................................................................................................................29
6.6.2 Equity Ratio............................................................................................................................30
6.6.3 Debt-Equity Ratio...................................................................................................................30
6.6.4 Times Interest Earned Ratio..................................................................................................30
6.6.5 Cash Coverage Ratio..............................................................................................................30
6.7 Asset Management or Turn Over Ratios.....................................................................................31
6.7.1 Inventory Turnover................................................................................................................31

6
 6.7.2 Days Sales in Inventory..........................................................................................................31
6.7.3 Receivables Turnover.............................................................................................................31
6.7.4 Days Sales in Receivables.......................................................................................................31
6.7.5 Total Assets Turnover............................................................................................................31
6.8 Profitability Ratios........................................................................................................................31
6.8.1 Profit Margin..............................................................................................................................31
6.8.2 EBITDA Margin.....................................................................................................................32
6.8.3 Return on Assets.....................................................................................................................32
6.8.4 Return on Equity....................................................................................................................32
6.9 Market Value Ratios......................................................................................................................32
6.9.1 Earnings Per Share.................................................................................................................32
6.9.2 Price to Earnings Ratio..............................................................................................................32
6.9.3 Market to Book Value............................................................................................................32
6.9.4 Market Capitalization............................................................................................................33
REFERENCES........................................................................................................................................34

7
 CHAPTER 1
INTRODUCTION
Dell Technologies Inc.
Dell Technologies Inc. is an American multinational technology company headquartered in
Round Rock, Texas. It was formed as a result of the September 2016 merger of Dell and EMC
Corporation. Dell’s products include personal computers, servers, smartphones, televisions,
computer software, computer security, and network security, as well as information security
services. Dell ranked 35th on the 2018 Fortune 500 ranking of the largest United States
corporations by total revenue.

Mission Statement
“To be the most successful computer company in the world at delivering the best customer
experience in markets we serve. In doing so, Dell will meet customer expectations of the
Highest quality.”

HP Inc.
HP Inc. is an American multinational information technology company headquartered in Palo
Alto, California, that develops personal computers (PCs), printers and related supplies, as well
as 3D printing solutions.
It was formed on November 1, 2015, renamed from the personal computer and printer divisions
of the original Hewlett-Packard Company, with that company's enterprise product and business
services divisions becoming Hewlett Packard Enterprise. The split was structured so that
Hewlett-Packard changed its name to HP Inc. and spun off Hewlett Packard Enterprise as a new
publicly traded company. HP Inc. retains Hewlett-Packard's pre-2015 stock price history and its
former stock ticker symbol, HPQ, while Hewlett Packard Enterprise trades under its own
symbol, HPE.
HP is listed on the New York Stock Exchange and is a constituent of the S&P 500 Index. It is
the world's 2nd largest personal computer vendor by unit sales as of January 2021, after Lenovo.
In the 2018 Fortune 500 list, HP is ranked 58th largest United States corporation by total revenue

Mission Statement
“We create technology that makes life better for everyone, everywhere. Our mission is to
engineer experiences that amaze.”

8
 CHAPTER 2
WORKING CAPITAL ANALYIS
ALL THE CALCULATION ARE IN DOLLARS

Dell Technologies Inc.

1.1 Inventory Conversion Period

The inventory conversion period is the time required to obtain materials for a product,
manufacture it, and sell it.

Inventory Conversion Period = Inventory ÷ Sales Per Day

Inventory = 5,898 million

Sales = 101,197 million

Sales Per Day = 101,197,000,000 ÷ 360 = 281,102,777.778

Inventory Conversion Period = 5,898,000,000 ÷ 281,102,777.778 = 20.9 ≅ 21 Days

This means that in 2021 the company converted its raw material into finished products and
sold them in 21 days.

Suggestion: If Dell wants to further improve their Inventory Conversion Period they have to
increase their sales while maintaining or decreasing their inventory level by restricting their
investment in current assets.

1.2 Receivable Collection Period

Receivable collection period tells that how long it takes after a credit sale to receive payment.

Receivable Conversion Period = Receivables ÷ Sales Per Day

Receivables = 12,912 + 5,089 = 18,001 million

Sales Per Day = 281,102,777.778

Receivables Collection Period = 18,001,000,000 ÷ 281,102,777.778 = 64.03 ≅ 64 Days

This means that in 2021 the company collected it receivables back after 64 days of the sales.

Suggestions: Dell can improve their receivable collection period by restricting their credit
policy. They can also offer discounts on early payments.

9
2.3 Payable Deferral Period
The period of time a firm takes to pay back their suppliers or creditors for their material
purchases.

Using Cost of Goods Sold instead of Purchases due to the non-availability of Purchases.

Payable Deferral Period = Payables ÷ Cost of Goods Sold

Payables = 27,143 million

Cost of Goods Sold = 79,306 million

Cost of Goods Sold Per Day = 79,306,000,000 ÷ 360 = 220,294,444.444

Payable Deferral Period = 27,143,000,000 ÷ 220,294,444.444 = 123.2 ≅ 123 days

This means the company paid off its payables after 4 months of making the purchases in
2021.

Suggestion: Dell can increase their payable deferral period further by making late payments
while maintaining good relations with suppliers.

2.4 Cash Conversion Cycle

A business’s cash conversion cycle is a measurement of how much time it takes to turn a cash
investment in the business into a cash return in the form of sales.

CCC = Inventory Conversion Period + Receivable Collection Period – Payable Deferral

Period

21 + 64 – 123 = ‒38 Days

The cash conversion cycle of Dell Technologies Inc. says that its inventory was sold, and
receivables were collected before they had to pay for it. This situation tells that Dell
Technologies had high liquidity during fiscal year 2021. In other words, the vendors are
financing their business operations.

2.5 Average Daily Sales

The average number of products that are sold each day

ADS = Annual Sales ÷ 360

ADS = 101,197,000,000 ÷ 360 = 281,102,777.778

This means that in 2021 Dell Technologies Inc. sold almost 281.1 million worth of products
daily on average.

10
Suggestions: Dell has to increase their annual sales by attracting more customers, or they can
also increase their ADS by increasing the frequency of transactions per customer.

2.6 Daily Sales Outstanding

Days sales outstanding (DSO) is a measure of the average number of days that it takes a
company to collect payment for a sale.

DSO = Receivables ÷ Sales Per Day

DSO = 18,001,000,000 ÷ 281,102,777.778 = 64.03 ≅ 64 Days

This means that in 2021 Dell Technologies Inc. had collected its receivables after 64 days of
sales.

Suggestions: Dell can reduce their DSO by making their credit period strict or providing
discounts on early payments encouraging the customers to pay earlier.

2.7 Receivables
The balance of money due to a firm for goods or services delivered or used but not yet paid for
by customers.

Receivables = ADS × DSO

Receivables = 281,102,777.778 × 64.03 = 18,001 million

This means that Dell Technologies Inc.’s receivables for 2021 were 18,001 million.

11
 CHAPTER 3
RATIO ANALYSIS
ALL THE CALCULATION ARE IN DOLLARS

Dell Technologies Inc.

3.1 Short-term Solvency Measures

Financial ratios that are intended to provide information about a firm’s solvency or liquidity over
the short run.

3.1.1 Current Ratio = Current Assets ÷ Current Liabilities

Current Assets = 45,033 million
Current Liabilities = 56,219 million
Current Ratio = 45,033,000,000 ÷ 56,219,000,000 = 0.80 Times

This means that Dell Technologies Inc. was able to pay almost 80% of its liabilities with the
current assets it had in 2021.

Suggestions: Dell can improve its current ratio by increasing its current assets by selling unused
assets and decreasing the current liabilities by paying them off.

3.1.2 Quick Ratio/ Acid Test Ratio = Current Assets – Inventory ÷ Current Liabilities
Current Assets = 45,033 million
Inventory = 5,898 million
Current Liabilities = 56,219 million
Quick Ratio = 45,033,000,000 – 5,898,000,000 ÷ 56,219,000,000 = 0.696 ≅ 0.70 Times

This means the company was able to pay almost 70% of its liabilities when the inventory
which is not the most liquid asset was excluded from its current assets of 2021.

Suggestions: Dell can improve their Quick Ratio by increasing inventory turnover, through this
way quick assets would rise. Quick Ratio can also be improved by selling unused assets and
decreasing current liabilities by paying them off.

3.1.3 Cash Ratio = Cash÷ Current Liabilities

Cash = 9,477 million
Current Liabilities = 56,219 million
Cash Ratio = 9,477,000,000 ÷ 56,219,000,000 = 0.168 ≅ 0.17 Times

This means that Dell Technologies Inc. was able to pay almost a 17% of its liabilities from
the cash it had in 2021.

12
Suggestions: Cash Ratio of Dell can be increased by offering discounts to encourage early
payments, depositing its extra cash in high interest yielding savings accounts.

3.2 Long-term Solvency Measures

Long-term solvency ratios are designed to measure the ability of a business to meet its financial
obligations in the medium and longer term.

3.2.1 Debt Ratio = Total Assets – Total Equity ÷ Total Assets

Total Assets = 92,735 million
Total Equity = (1,580) million
Debt Ratio = 92,735,000,000 – 1,580,000,000 ÷ 92,735,000,000 = 0.98 = 98%

This means that from the total assets of Dell Technologies Inc. 98% were financed by debt
in 2021. This means the company owes 98 cents for each dollar they owned.

Suggestions: Dell must improve their debt ratio by increasing its sales an reducing its expenses
to payout its debts and in the meantime not financing its assets from debt.

3.2.2 Equity Ratio = Total Equity ÷ Total Assets

Total Assets = 92,735 million
Total Equity = (1,580) million
Equity Ratio = 1,580,000,000 ÷ 92,735,000,000 = 0.02 = 2%

This means that in 2021 Dell Technologies Inc. finances only 2% of assets from Equity.

Suggestions: Dell must improve its equity ratio by increasing its profitability in order to convert
its shareholders equity from negative to positive. Dell must start financing from its equity in
order to balance out its debt-to-equity ratio as well.

3.2.3 Debt-Equity Ratio = Debt Ratio ÷ Equity Ratio

Debt Ratio = 0.98
Equity Ratio = 0.02
Debt-Equity Ratio = 0.98 ÷ 0.02 = ‒57.69

This means that Dell had almost 60 dollars of debt for every one dollar of equity. This
shows that the company had a negative shareholders equity, in other words the company’s
liabilities exceeded its assets which is a sign of elevated risk indicating that the company
maybe was at the risk of bankruptcy.

Suggestions: As the debt-to-equity ratio of Dell is negative, Dell must increase its profitability to
convert its stockholder’s deficit into benefit. Dell must also cut its expenses to a greater extent.
Another way to reduce its debt is to raise money by selling its shares, Dell must payout its
liabilities and make sure it doesn’t take any additional loan as when the loans are paid-off the

13
ratio will automatically start to balance out. Dell must also make sure to efficiently manage its
inventory by ensuring that no money goes to waste.

3.2.4 Times Interest Earned Ratio = EBIT ÷ Interest

EBIT = 4,659 million
Interest = 1,264 million
Times Interest Earned Ratio = 4,659,000,000 ÷ 1,264,000,000 = 3.68 ≅ 3.7 Times

This means that Dell Technologies Inc. was able to pay back its interest 3.7 times from its
EBIT of 2021. If Dell Technologies Inc. wanted to increase their chances of getting loan,
then they should have increased their time interest earned ratio.

Suggestions: In order to increase its times interest earned ratio Dell must increase its sales and
restrict its expenses. They can also pay down its debt to reduce interest or use greater level of
equity in its capital structure.

3.2.5 Cash Coverage Ratio = EBIT + Depreciation and Amortization ÷ Interest

EBIT = 4,659 million
Depreciation and Amortization = 4,551 million
Interest = 1,264 million
Cash Coverage Ratio = 4,659,000,000 + 4,551,000,00 ÷ 1,264,000,000 = 7.28 Times

This shows that in 2021 after adding the non-cash expenses to the EBIT Dell Technologies
Inc. was able to pay back its total interest almost 7.3 times, which is almost 3.5 times more
than when non-cash assets were not added.

Suggestions: In order to improve its cash coverage ratio Dell must increase its sales and reduce
its expenses.

3.3 Asset Management or Turnover Ratio

Ratios to measure turnovers of inventory, receivables, and assets with respect to the sales of the
company.

3.3.1 Inventory Turnover = Cost of Goods Sold ÷ Inventory

Cost of Goods Sold = 79,306 million
Inventory = 5,898 million
Inventory Turnover = 79,306,000,000 ÷ 5,898,000,000 = 13.4 times

This means that Dell Technologies Inc. turned over or had restocked its inventory more
than 13 times in the year 2021.

Suggestions: In order to increase the inventory turnover Dell must restrict its investment in C.A
in order to not store any extra inventory.

14
 3.3.2 Day Sales in Inventory = 365 ÷ Inventory Turnover
Inventory Turnover = 13.4 times
Day Sales in Inventory = 365 ÷ 13.4 = 27 Days

This means that in 2021 Dell Technologies Inc. had repurchased its inventory after every
27 days.

Suggestions: Dell can further improve its day sales in inventory by developing their products
earlier through utilizing technology efficiently.

3.3.3 Receivable Turnover = Sales ÷ Receivables

Sales = 101,197 million
Receivables = 18,001 million
Receivables Turnover = 101,197,000,000 ÷ 18,001,000,000 = 5.6 Times

This shows that in 2021 Dell Technologies Inc. was able to collect its receivables more than
5 times.

Suggestions: Dell can improve its receivable turnover by restricting its credit policy, providing
discounts on early payments.

3.3.4 Day Sales in Receivables = 365 ÷ Receivables Turnover

Receivable Turnover = 5.6 Times
Day Sales in Receivables = 365 ÷ 5.6 = 64.9 ≅ 65 Days

This means that in 2021 it took Dell Technologies Inc. almost 65 days to collect its
receivables. This could have been reduced even more by making the credit policy strict.

Suggestions: Day sales in receivables can be improved by making the creditors pay early
through offering discounts and other incentives.

3.3.5 Total Assets Turnover = Sales ÷ Total Assets

Sales = 101,197 million
Total Assets = 92,735 million
Total Assets Turnover = 101,197,000,000 ÷ 92,735,000,000 = 1.09

This means that in 2021 Dell Technologies Inc. has generated 1.09 dollar worth of sales by
efficiently utilizing every 1 dollar worth of assets.

Suggestions: Dell can increase its total asset turnover by increasing its sales, selling unused
assets, and improving inventory management system.

3.4 Profitability Ratios

Profitability ratios are used to assess a business's ability to generate earnings relative to its
revenue, operating costs, balance sheet assets, or shareholders' equity.

15
 3.4.1 Profit Margin = Net Income ÷ Sales
Net Income = 5,563 million
Sales = 101,197 million
Profit Margin = 5,563,000,000 ÷ 101,197,000,000 = 0.055 = 5.5%

This means that in 2021 Dell Technologies Inc. generated 5.5% of profit on their total sales.

Suggestions: Dell can increase their profit margin by increasing their sales and reducing their
operating costs. Dell must also acquire more customers and develop strong relations with
customers.

3.4.2 EBITDA Margin = EBITDA ÷ Sales

EBITDA = 9,210 million
Sales = 101,197 million
EBITDA Margin = 9,210,000,000 ÷ 101,197,000,000 = 0.091 = 9.1%

This means that in 2021 Dell Technologies Inc. generated 9.1% earnings on their total sales
before paying interest and taxes.

Suggestions: Dell can increase their EBITDA margin by increasing its sales, reducing costs,
managing working capital by managing inventory.

3.4.3 Return on Assets = Net Income ÷ Total Assets

Net Income = 5,563 million
Total Assets = 92,735 million
Return on Assets = 5,563,000,000 ÷ 92,735,000,000 = 0.059 = 5.99 ≅ 6%

This means that Dell Technologies Inc. Earned almost 6% of returns on their total assets in
2021.

Suggestions: Dells can improve their returns on assets by monitoring its assets expenses
monthly, increasing its net income, reducing asset costs, improving operations and processes.

3.4.4 Return on Equity = Net Income Attributable to Shareholder ÷ Total Equity

Net Income Attributable to Shareholders = 4,948 million
Total Equity = (1,580) million
Return on Equity = 4,948,000,000 ÷ 1,580,000,000 = - 3.13 = - 313%

This means that as the shareholders equity of Dell Technologies Inc. was negative the
returns were meant to be negative due to excessive debt on the firm.

Suggestions: In order to increase its ROE Dell must convert its shareholders deficit into earnings
and increase its profit margins. Dell can also improve its asset turnover and distribute its idle
cash to its shareholders.

16
 3.5 Market Value Ratios
Market value ratios are important to track the share values of a company.

3.5.1 Earnings Per Share = Net Income Attributable to Shareholders ÷ Shares

Outstanding
Net Income Attributable to Shares = 4,948 million
Shares Outstanding = 762 million
Earnings Per Share = 4,948,000,000 ÷ 762,000,000 = 6.49

This means that in 2021 Dell Technologies Inc. earned 6.49 dollars per each share of its
stock.

Suggestions: Dell can boost its EPS by increasing its earnings or by reducing its shares
outstanding through share buybacks.

3.5.2 Price to Earnings Ratio = Price Per Share ÷ Earnings Per Share
Price Per Share = 56.24
Earnings Per Share = 6.49
Price to Earnings Ratio = 56.24 ÷ 6.49 = 8.66

This means that shareholders of Dell Technologies Inc. paid 8.66 times more than they
earned per share in 2021.

Suggestions: Dell can improve its P/E ratio by either increasing its income which automatically
will increase its EPS, or by decreasing the market price per share.

3.5.3 Market to Book Value = Market Value Per Share ÷ Book Value Per Share
Market Value Per Share = 56.24
Book Value Per Share = ‒ 2.07
Market to Book Value = ‒27.2

This huge difference tells that the share’s of Dell were overvalued in the market which was
due to the fact that their liabilities outnumbered their assets saying that the firm was
insolvent in 2021. The stockholders paid premium over the market value.

Suggestions: In order to improve their market to book value Dell must increase their assets and
reduce their liabilities to increase their book value per share which automatically will balance out
its market to book value. Dell can also improve its Book value per share by repurchasing
common stocks.

3.5.4 Market Capitalization = Price Per Share × Shares Outstanding

Price Per Share = 56.24
Shares Outstanding = 762 million
Market Capitalization = 56.24 × 762,000,000 = 42,854,880,000

17
 This means the total value of Dell Technologies Inc. in 2021 was almost 42.90 billion
Dollars.

Suggestions: Dell can increase its market cap by introducing new shares, or by increasing the
value of its stocks.

18
 CHAPTER 4
WORKING CAPITAL ANALYSIS
ALL THE CALCULATION ARE IN DOLLARS

HP Inc.

4.1 Inventory Conversion Period

The inventory conversion period is the time required to obtain materials for a product,
manufacture it, and sell it.

Inventory Conversion Period = Inventory ÷ Sales Per Day

Inventory = 7,930 million

Sales = 63,487 million

Sales Per Day = 63,487,000,000 ÷ 360 = 176,352,777.778

Inventory Conversion Period = 7,930,000,000 ÷ 176,352,777.778 = 44.9 ≅ 45 Days

This means the company converts its raw material into finished product and sell them in 45
days. The conversion period can further be reduced by efficiently utilizing technology.

Suggestion: If HP wants to further improve their Inventory Conversion Period they have to
increase their sales while maintaining or decreasing their inventory level by restricting their
investment in current assets.

4.2 Receivable Collection Period

Receivable collection period tells that how long it takes after a credit sale to receive payment.

Receivable Conversion Period = Receivables ÷ Sales Per Day

Receivables = 5,511 million

Sales Per Day = 176,352,777.778

Receivable Conversion Period = 5,511,000,000 ÷ 176,352,777.778 = 31.2 ≅ 31 Days

This means the company gets it receivables back after every month of the sales.

Suggestions: HP can improve their receivable collection period by restricting their credit policy.
They can also offer discounts on early payments.

19
 4.3 Payable Deferral Period
The period of time a firm takes to pay back their suppliers or creditors for their material
purchases.

Payable Deferral Period = Payables ÷ Cost of Goods Sold

Using Cost of Goods instead of purchases due to the non-availability of purchases

Payables = 16,075 million

Cost of Goods Sold = 50,070 million

Cost of Goods Sold per Year = 50,070,000,000÷ 360 = 139,083,333.333

Payable Deferral Period = 16,075,000,000 ÷ 139,083,333.333 = 115.57 ≅ 116 days

This means the company pays off its payables after 116 days of making the purchases.

Suggestion: HP can increase their payable deferral period further by making late payments while
maintaining good relations with suppliers.

4.4 Cash Conversion Cycle

A business’s cash conversion cycle is a measurement of how much time it takes to turn a cash
investment in the business into a cash return in the form of sales.

CCC = Inventory Conversion Period + Receivable Collection Period – Payable Deferral

Period

45 + 31 – 116 = - 40
The cash conversion cycle of HP Inc. says that its inventory was sold, and receivables were
collected before they had to pay for it. This situation tells that HP had high liquidity during
fiscal year 2021.

4.5 Average Daily Sales = Annual Sales ÷ 360

The average number of products that are sold each day

ADS = 63,487,000,000 ÷ 360 = 176,352,777.778

This means that HP Inc. in 2021 sold products of worth about 176.3 million per day.

Suggestions: HP can increase their annual sales by attracting more customers, or they can also
increase their ADS by increasing the frequency of transactions per customer.

20
 4.6 Daily Sales Outstanding = Receivables ÷ Sales Per Day
Days sales outstanding (DSO) is a measure of the average number of days that it takes a
company to collect payment for a sale.

Receivables = 5,511 million

Sales Per Day = 176,352,777.778

Daily Sales Outstanding = 5,511,000,000 ÷ 176,352,777.778 = 31.2 ≅ 31 Days

This means that HP Inc. collects its Receivables after almost every month.

Suggestions: HP can reduce their DSO by making their credit period strict or providing
discounts on early payments encouraging the customers to pay earlier.

4.7 Receivables = ADS × DSO

The balance of money due to a firm for goods or services delivered or used but not yet paid for
by customers.

Receivables = 176,352,777.778 × 31.2 = 5,511,000,000

This means that the total receivables of HP Inc. account for almost 5,511 million.

21
 CHAPTER 5
RATIO ANALYSIS
ALL THE CALCULATION ARE IN DOLLARS

HP Inc.

5.1 Short-term Solvency Measures

Financial ratios that are intended to provide information about a firm’s solvency or liquidity over
the short run.

5.1.1 Current Ratio = Current Assets ÷ Current Liabilities

Current Assets = 22,170 million
Current Liabilities = 29,096 million
Current Ratio = 22,170,000,000 ÷ 29,096,000,000 = 0.76 Times

This means that HP Inc. was able to pay 76% of its liabilities with the current assets it had
in 2021.
Suggestions: HP can improve its current ratio by increasing its current assets by selling unused
assets and decreasing the current liabilities by paying them off.

5.1.2 Quick Ratio/ Acid Test Ratio = Current Assets – Inventory ÷ Current Liabilities
Current Assets = 22,170 million
Inventory = 7,930 million
Current Liabilities = 29,096 million
Quick Ratio = 22,170,000,000 – 7,930,000,000 ÷ 29,096,000,000 = 0.49 Times

This means the company was able to pay almost half of its liabilities when the inventory
was excluded from its current assets of 2021.
Suggestions: HP can improve their Quick Ratio by increasing inventory turnover, through this
way quick assets would rise. Quick Ratio can also be improved by selling unused assets and
decreasing current liabilities by paying them off.

22
 5.1.3 Cash Ratio = Cash ÷ Current Liabilities
Cash = 4,299 million
Current Liabilities = 29,096 million
Cash Ratio = 4,299,000,000 ÷ 29,096,000,000 = 0.147 Times

This means that HP Inc. was able to pay almost 15% of its liabilities from the cash it had in
2021.
Suggestions: Cash Ratio of HP can be increased by offering discounts to encourage early
payments, depositing its extra cash in high interest yielding savings accounts.

5.2 Long-term Solvency Measures

Long-term solvency ratios are designed to measure the ability of a business to meet its financial
obligations in the medium and longer term.

5.2.1 Debt Ratio = Total Assets – Total Equity ÷ Total Assets

Total Assets = 38,610 million
Total Equity = (1,650) million
Debt Ratio = 38,610,000,000 – 1,650,000,000 ÷ 38,610,000,000 = 0.957 ≅ 96%

This means that from the total assets of HP Inc. 96% are financed by debt in 2021.
Suggestions: HP must improve their debt ratio by increasing its sales an reducing its expenses to
payout its debts and in the meantime not financing its assets from debt.

5.2.2 Equity Ratio = Total Equity ÷ Total Assets

Total Assets = 38,610 million
Total Equity = (1,650) million
Equity Ratio = 1,650,000,000 ÷ 38,610,000,000 = 0.04 = 4%

This means that in 2021 HP Inc. finances its remaining 4% of assets from Equity.
Suggestions: HP must improve its equity ratio by increasing its profitability in order to convert
its shareholders equity from negative to positive. HP must start financing from its equity in order
to balance out its debt-to-equity ratio as well.

5.2.3 Debt-Equity Ratio = Debt Ratio ÷ Equity Ratio

Debt Ratio = 0.96
Equity Ratio = 0.04
Debt-Equity Ratio = 0.96 ÷ 0.04 = -22.4

This means that in comparison to equity HP Inc. finances more than 22 times of its total
assets from debt. The negative sign shows that the firms’ current assets are less than its

23
current liabilities which is a sign of riskiness point towards the fact that the company
maybe at the edge of bankruptcy.
Suggestions: As the debt-to-equity ratio of HP is negative, HP must increase its profitability to
convert its stockholder’s deficit into benefit. HP must also cut its expenses to a greater extent.
Another way to reduce its debt is to raise money by selling its shares, HP must payout its
liabilities and make sure it doesn’t take any additional loan as when the loans are paid-off the
ratio will automatically start to balance out. HP must also make sure to efficiently manage its
inventory by ensuring that no money goes to waste.

5.2.4 Times Interest Earned Ratio = EBIT ÷ Interest

EBIT = 5,302 million
Interest = 2,209 million
Times Interest Earned Ratio = 5,302,000,000 ÷ 2,209,000,000 = 2.40 Times

This means that HP Inc. was able to pay back its interest almost 2 and half times from its
EBIT of 2021.

Suggestions: In order to increase its times interest earned ratio HP must increase its sales and
restrict its expenses. They can also pay down its debt to reduce interest or use greater level of
equity in its capital structure.
5.2.5 Cash Coverage Ratio = EBIT + Depreciation and Amortization ÷ Interest
EBIT = 5,302 million
Depreciation and Amortization = 785 million
Interest = 2,209 million
Cash Coverage Ratio = 5,302,000,000 + 785,000,00 ÷ 2,209,000,000 = 2.75 Times

This shows that in 2021 after adding the non-cash expenses to the EBIT HP Inc. was able to
pay back its total interest almost 3 times.
Suggestions: In order to improve its cash coverage ratio HP must increase its sales and reduce its
expenses.

5.3 Asset Management or Turnover Ratio

Ratios to measure turnovers of inventory, receivables, and assets with respect to the sales of the
company.

5.3.1 Inventory Turnover = Cost of Goods Sold ÷ Inventory

Cost of Goods Sold = 50,070 million
Inventory = 7,930 million
Inventory Turnover = 50,070,000,000 ÷ 7,930,000,000 = 6.314 times

24
This means that HP Inc. turned over or had restocked its inventory more than 6 times in
the year 2021.
Suggestions: In order to increase the inventory turnover HP must restrict its investment in C.A
in order to not store any extra inventory.

5.3.2 Day Sales in Inventory = 365 ÷ Inventory Turnover

Inventory Turnover = 6.314 times
Day Sales in Inventory = 365 ÷ 6.314 = 57.8 ≅ 58 Days

This means that in 2021 HP Inc. had repurchased its inventory after every 58 days.
Suggestions: HP can improve its day sales in inventory by developing their products earlier
through utilizing technology efficiently.

5.3.3 Receivable Turnover = Sales ÷ Receivables

Sales = 63,487 million
Receivables = 5,511 million
Receivables Turnover = 63,487,000,000 ÷ 5,511,000,000 = 11.5 Times

This shows that in 2021 HP Inc. was able to collect its receivables more than 11 times.
Suggestions: HP can improve its receivable turnover by restricting its credit policy, providing
discounts on early payments.

5.3.4 Day Sales in Receivables = 365 ÷ Receivables Turnover

Receivable Turnover = 11.5
Day Sales in Receivables = 365 ÷ 11.5 = 31.7 ≅ 32 Days

This means that in 2021 it took HP Inc. a little more than a month to collect its receivables.
Suggestions: Day sales in receivables can be improved by making the creditors pay early
through offering discounts and other incentives.

5.3.5 Total Assets Turnover = Sales ÷ Total Assets

Sales = 63,487 million
Total Assets = 38,610 million
Total Assets Turnover = 63,487,000,000 ÷ 38,610,000,000 = 1.64

This means that in 2021 HP Inc. has generated 1.64 Dollars of sales by efficiently utilizing
every 1 Dollar of assets.

Suggestions: HP can increase its total asset turnover by increasing its sales, selling unused
assets, and improving inventory management system.

25
 5.4 Profitability Ratios
Profitability ratios are used to assess a business's ability to generate earnings relative to its
revenue, operating costs, balance sheet assets, or shareholders' equity.

5.4.1 Profit Margin = Net Income ÷ Sales

Net Income = 6,503 million
Sales = 63,487 million
Profit Margin = 6,503,000,000 ÷ 63,487,000,000 = 0.102 = 10.2%

This means that in 2021 HP Inc. generated a little more than 10% of profit on their total
sales.
Suggestions: HP can increase their profit margin by increasing their sales and reducing their
operating costs. HP must also acquire more customers and develop strong relations with
customers.

5.4.2 EBITDA Margin = EBITDA ÷ Sales

EBITDA = 6,087 million
Sales = 63,487 million
EBITDA Margin = 6,087,000,000 ÷ 63,487,000,000 = 0.0959 = 9.59%

This means that in 2021 HP Inc. generated more than 9% earnings on their total
sales before paying interest and taxes. The reason why EBITDA margin was less than
Profit margin was due to the interest earned by the firm.
Suggestions: HP can increase their EBITDA margin by increasing its sales, reducing costs,
managing working capital by managing inventory.

5.4.3 Return on Assets = Net Income ÷ Total Assets

Net Income = 6,503 million
Total Assets = 38,610 million
Return on Assets = 6,503,000,000 ÷ 38,610,000,000 = 0.168 = 16.8%

This means that HP Inc. earned almost 17% of returns on their total assets in 2021
Suggestions: HP can improve their returns on assets by monitoring its assets expenses monthly,
increasing its net income, reducing asset costs, improving operations and processes.

5.4.4 Return on Equity = Net Income Attributable to Shareholders ÷ Total Equity

Net Income = 6,503 million
Total Equity = (1,650) million
Return on Equity = 6,503,000,000 ÷ 1,650,000,000 = 3.94 = -394%

26
As the shareholders equity was negative which shows that the shareholders were in deficit
the returns were also negative for the year 2021.
Suggestions: In order to increase its ROE HP must convert its shareholders deficit into earnings
and increase its profit margins. HP can also improve its asset turnover and distribute its idle cash
to its shareholders.

5.5 Market Value Ratios

Market value ratios are important to track the share values of a company.

5.5.1 Earnings Per Share = Net Income Attributable to Shareholders ÷ Shares

Outstanding
Net Income Attributable to Shareholders = 6,503 million
Shares Outstanding = 1,208 million
Earnings Per Share = 6,503,000,000 ÷ 1,208,000,000 = 5.38 Dollars

This means that HP Inc earned 5.38 dollars per each share of their stock.

Suggestions: HP can boost its EPS by increasing its earnings or by reducing its shares
outstanding through share buybacks.

5.5.2 Price to Earnings Ratio = Price Per Share ÷ Earnings Per Share
Price Per Share = 29.19
Earnings Per Share = 5.38
Price to Earnings Ratio = 29.19 ÷ 5.38 = 5.4

This means that the shareholders of HP Inc. paid 5.4 times more than they earned per
share in 2021.

Suggestions: HP can improve its P/E ratio by either increasing its income which automatically
will increase its EPS, or by decreasing the market price per share.

5.5.3 Market to Book Value = Market Value Per Share ÷ Book Value Per Share
Market Value Per Share = 29.19
Book Value Per Share = ‒1.36
Market to Book Value = ‒21.5

This huge difference between market to book value tells that the stocks of HP are
overvalued, and the firms’ liabilities outnumbers its assets saying that the firm is insolvent.

Suggestions: In order to improve their market to book value HP must increase their assets and
reduce their liabilities to increase their book value per share which automatically will balance out
its market to book value. HP can also improve its Book value per share by repurchasing common
stocks.

27
 5.5.4 Market Capitalization = Price Per share × Shares Outstanding
Price Per Share = 29.19
Shares Outstanding = 1,208 million
Market Capitalization = 29.19 × 1,208,000,000 = 35,261,520,000

This means that HP Inc. had a value of 35.2 billion Dollar in 2021.

Suggestions: Dell can increase its market cap by introducing new shares, or by increasing the
value of its stocks.

CHAPTER 6
COMPARATIVE ANALYSIS

6.1 Cash Conversion Cycle

6.1.1 Inventory Conversion Period:
The ICP of HP Inc is 45 days which is greater than that of Dell Technologies which is 21 Days.
So, basically it means that Dell converted its raw material into finished products and sold them
24 days earlier than HP.
HP can improve its ICP by encouraging earlier payments, speeding up delivery time, making it
easier to pay, increasing their sales while maintaining or decreasing their inventory level.
6.1.2 Receivable Collection Period:
The RCP of Dell Technologies is 64 days which is greater than that of HP Inc which is 31 days.
So, basically it means that HP collected its receivables 33 days earlier than Dell.
Dell can shorten this cycle by requesting upfront payments or deposits and by restricting their
credit policy or offering discounts on early payments.
6.1.3 Payable Deferral Period:
The PDP of HP Inc is 116 days which is less than that of Dell Technologies which is 123 days.
So, basically it means that in 2021 Dell paid its payables 7 days later than that of HP.
HP can improve its Payable Deferral Period by making late payments to its suppliers while
maintaining good relations with them
6.1.4 Cash Conversion Cycle:
The CCC of HP Inc is ‒40 days which is better than that of Dell Technologies which is ‒38 days.
So, it basically means that Dell paid to its suppliers 2 days earlier than that of HP.
The CCC of both companies clearly shows that both companies had high liquidity during the
year 2021.

28
 6.2 Average Daily Sales:
The Average Daily Sales of Dell Technologies is 281.1 million which is greater than that of HP
Inc which is 176.3 million. So, basically it means that Dell sold 104.8 million worth of products
more than that of HP daily on average.
HP must increase the number of its customers, increase average transaction size, increase the
frequency of transactions per customer.
6.3 Day Sales Outstanding:
The DSO of Dell Technologies is 64 days which is greater than that of HP Inc which is 31 days.
So, basically it means that HP collected its receivables 33 days earlier than Dell.
Dell can improve its DSO by timely billing through lightning-fast invoicing, and fast payment
incentives shortening net terms for payments or by making its credit policy strict.
6.4 Receivables
The Receivables of Dell Technologies were 18,001 million which were greater than that of HP
Inc which were 5,511 million. So, basically it means that HP had 12,490 million less receivables
than Dell.
6.5 Short-term Solvency Measures
6.5.1 Current Ratio
The Current Ratio of Dell Technologies was 0.80 times which was greater than that of HP Inc
which was 0.76 times. So, basically it means that HP was able to pay only 76% of its current
liabilities while Dell was able to pay only 80% of its current liabilities from their current assets.
Both companies can improve their current ratios by increasing their current assets and by selling
unused assets and also by decreasing their liabilities by paying them off.

6.5.2 Quick Ratio/ Acid Test Ratio

The Quick Ratio of Dell Technologies was 0.70 times which was greater than that of HP Inc
which was 0.49 times. So, basically it means that HP was able to pay almost only 50% of its
current liabilities while Dell was able to pay only 70% of its current liabilities from their current
assets when inventory which is not the most liquid asset was excluded.
Both companies can improve their quick ratios by increasing their current assets as well as their
inventory turnover and by selling unused assets and also by decreasing their liabilities by paying
them off.

6.5.3 Cash Ratio

The Cash Ratio of Dell Technologies was 0.17 times which was greater than that of HP Inc
which was 0.147 times. So, basically it means that HP was able to pay almost only 15% of its
current liabilities while Dell was able to pay only 17% of its current liabilities from the cash,
they had in 2021.
Both companies can improve their cash ratios by encouraging early payments through offering
discounts or by depositing their cash in high interest yielding saving accounts.

29
 6.6 Long-term Solvency Measures
6.6.1 Debt Ratio
The Debt Ratio of Dell Technologies was 0.98 times which was greater than that of HP Inc
which was 0.96 times. So, basically it means that HP financed 96% of its assets while Dell
financed 98% of its assets from debt in 2021. This situation is predicting that the companies are
almost fully drowned in debt which makes both of the company’s highly riskier for individuals
to invest.
Both companies can improve their debt ratios by increasing their sales and cutting down their
expenses while paying off their debt and in the meantime not financing from debt any further.

6.6.2 Equity Ratio

The Equity Ratio of HP Inc was 0.04 times which was greater than that of Dell Technologies
which was 0.02 times. So, basically it means that HP financed only 4% of its assets while Dell
financed only 2% of its assets from equity in 2021. This situation is predicting that the
companies are not financing their assets from equity because their equity was already in negative
which makes both of the company’s highly riskier for individuals to invest.
Both companies can improve their equity ratios by increasing their sales and cutting down their
expenses. Both firms must also increase their profitability in order to convert their stockholder’s
equity in positive numbers.

6.6.3 Debt-Equity Ratio

The Debt-to-equity Ratio of Dell Technologies was ‒57.69 times which was worse than that of
HP Inc which was ‒22.4 times. So, basically it means that HP owed almost 23 dollars of debt for
every dollar of equity while Dell owed almost 58 dollars of debt for every dollar of its equity in
2021. This situation is predicting that due to the negative sign it shows that both the company’s
assets outnumbered their liabilities thus making the shareholders equity negative. This situation
is a worst nightmare for every firm as it indicates high risk predicting that both the companies
were maybe at the edge of bankruptcy.
Both companies can improve their debt-to-equity ratio by increasing their sales and cutting down
their expenses while paying off their debt. Firms must also make sure not to take any loans and
payout their loan outstanding’s. Both firms must also manage their inventories so as to ensure
that no money goes to waste.

6.6.4 Times Interest Earned Ratio

Times Interest Earned ratio of Dell Technologies was 3.7 times which was greater than that of
HP Inc which was 2.4 times. So, it basically means that Dell was able to pay its interest 1.3 times
more than HP was able to pay from its EBIT.

30
Both the firms can improve their Times Interest Earned ratio by increasing profitability, by
improving sales and decreasing expenses. Both the companies can also payout their debts in
order to decrease their interest amount or by financing more from equity.

6.6.5 Cash Coverage Ratio

Cash Coverage ratio of Dell Technologies was 7.28 times which was greater than that of HP Inc
which was 2.75 times. So, it basically means that Dell was able to pay its interest 4.5 times more
than HP was able to pay from its EBITDA.

In order to improve their cash coverage ratio both firms must increase their sales and reduce their
expenses.

6.7 Asset Management or Turn Over Ratios

6.7.1 Inventory Turnover
The Inventory Turnover of HP Inc was 6.3 times which was less than that of Dell Technologies
which was 13.4 times. So, basically it means that Dell had restocked its inventory 7 times more
than that of HP in 2021. The inventor turnover for both the companies showed that both firms
were strict in their capital financing.

In order to further increase its inventory turnover HP can make their capital financing even more
strict so as not to store any extra inventory.

6.7.2 Days Sales in Inventory

The Days Sales in Inventory of HP Inc was 58 days which was greater than that of Dell
Technologies which was 27 days. So, basically it means that Dell sold all its inventory and
restocked it a month earlier than that of HP.
HP will have to adopt smart pricing strategy, or to develop their inventory earlier by efficiently
utilizing the technology.

6.7.3 Receivables Turnover

The Receivables Turnover of Dell Technologies was 5.6 times which was less than that of HP
Inc which was 11.5. So, basically it means that HP collected its receivables 6 times more than
that of Dell in 2021.
Dell must build strong client relationship, make accepting payments easy, restrict its credit
policy, offer discounts on early payments.

6.7.4 Days Sales in Receivables

The Days Sales in Receivables of Dell Technologies was 65 days which was greater than that of
HP Inc which was 32 days. So, basically it means that HP collected its receivables 33 days
earlier than that of Dell.
31
Dell must focus on customer credit, manage account receivable carefully, gather data about
current DSO status.

6.7.5 Total Assets Turnover

The Total Asset Turnover of Dell Technologies was 1.09 which was less than that of HP Inc
which was 1.64. So, basically it means that for every 1 unit of assets HP generated 0.55 units of
sales more than that of Dell.
Dell should increase its revenue, computerize its inventory, and order system, improving
inventory management.
6.8 Profitability Ratios
6.8.1 Profit Margin
The Profit Margin of HP Inc was 10.2% which was greater than that of Dell Technologies which
was 5.5%. So, basically it means that HP generated 4.7% greater profit than that of Audi Dell.
Dell must forecast its inventory properly, increase sales and reduce costs, acquire more
customers.

6.8.2 EBITDA Margin

The EBITDA Margin of Dell Technologies was 9.1% which was less than that of HP which was
9.59%. So, basically it means that HP generated 0.50% more earnings than that of Dell on their
total sales before paying interest and taxes.

Dell can improve its EBITDA by increasing its sales, reducing its costs and by efficiently
managing its working capital policies.

6.8.3 Return on Assets

The Return on Assets of HP Inc was 16.8% which was greater than that of Dell which was 6%.
So, basically it means that HP generated almost 10% more return on their assets than that of
Dell.
Dell should monitor its Assets expenses monthly, reduce inventory cost, Increasing net income.

6.8.4 Return on Equity

The Returns on Equity of HP Inc were ‒394% which were even worse than that of Dell
Technologies which were ‒313%. So, it basically means that due to the negative shareholders
equity and excessive loads of debt on both firms their returns were also negative.
Both firms must increase their profit margins, asset turnover, and distribute their ideal cash to
their shareholders to cope with their deficit.
6.9 Market Value Ratios
6.9.1 Earnings Per Share
The earnings per share of Dell Technologies was 6.49 dollars while EPS of HP Inc was 5.38
dollars. This basically means that the shareholders of Dell enjoyed 1.11 dollars of earnings more
than the earnings enjoyed by the shareholders of HP.

32
EPS can be boosted by increasing the earnings of a firm or by reducing the shares outstanding
through share buybacks.

6.9.2 Price to Earnings Ratio

The P/E ratio of Dell Technologies was 8.66 which was greater than that of HP Inc which was
5.4. This basically means that the shareholders of Dell paid almost 9 times more than what they
earned per share, while the shareholders of HP paid more than 5 times of what they earned per
share in 2021.

A good P/E ratio is the one where shareholders pay less than they earn per share so in order to
improve P/E ratio a firm must increase its earnings or decrease the price of its share.

6.9.3 Market to Book Value

The market to book value of HP Inc was ‒21.5 which was less bad than that of Dell
Technologies which was ‒27.2. This shows that due to the negative book value per share which
arose due to the negative stockholder’s equity the market to book value of both companies got
worse. Due to the negative market to book value the shareholders of both firms are paying a huge
premium for the stocks of these firms.

The market to book value can be improved by increasing the assets and decreasing the liabilities,
similarly firms can also improve their book value per share which automatically will balance out
this ratio. Firms can also improve their market to book value through the repurchase of common
stock.

6.9.4 Market Capitalization

Dell Technologies had a market cap of almost 42.90 billion dollars which was greater than that
of HP Inc which was 35.2 billion dollars. This basically tells that Dell cover a larger area of
market than HP.

Market cap can further be improved through the introduction of new shares or by increasing the
value of shares.

33
 REFERENCES

https://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_DELL_2021.pdf

https://s2.q4cdn.com/602190090/files/doc_financials/2021/ar/HPQ-Combined-2021-Annual-
Report-and-2022-Proxy-Statement.pdf

https://www.macrotrends.net/stocks/charts/HPQ/hp/financial-statements

https://www.macrotrends.net/stocks/charts/DELL/dell/financial-statements

https://www.nasdaq.com/market-activity/stocks/dell

https://www.nasdaq.com/market-activity/stocks/hpq

34