Surname Name: Course: Tutor: Date: Dell Financial Health 1.0 Company Profile Dell Inc.

is a global information technology company. It offers a broad range of technology solutions across the globe. It offers a variety of computing devices to its customers that include notebooks, personal computers, and tablets. It also provides hyperscale and value tower servers to enterprise customers and small organizations respectively. Dell was incorporated in 1984 in the United States and has its headquarters in Round Rock, Texas. 2.0 Liquidity Ratios Liquidity Ratios Current Ratio Quick Ratio Cash Ratio 2010 1.489555 1.422779 0.71411 2011 1.338485 1.274669 0.629608

2012 1.193225 1.134263 0.536243

The liquidity ratios indicate that Dell Inc. is a liquid company. liquidity ratios are used to evaluate a company`s ability to use its liquid assets and cash to pay its current obligations as and when they fall due. The current and quick ratios are particularly important in this respect. For all the three years, Dell`s current and quick ratio have been above 1. This implies that Dell has sufficient liquid assets to meet its short-term debt obligations as and when they fall due. However, it is equal worth noting that there has been a consistent decline in all the three ratios year and after year. In terms of cash ratio, Dell has scored below one, implying that its cash reserves are not sufficient to cover its current liabilities. 3.0 Leverage Ratios

Surname Financial Leverage Ratio Total Debt Ratio Debt to Equity Ratio Equity Multiplier Times interest earned ratio Cash coverage 2010 0.80 0.56 4.97 -21.90 -21.90 2011 0.80 0.61 4.99 -21.62 -21.62

2012 0.77 0.46 4.44 -16.90 -16.90

Leverage ratios reflect how Dell finances its assets using a combination of debt and equity. The total debt ratio indicates that the largest percentage of Dell`s assets are financed through debt. In 2010 and 2011 respectively, the company financed its assets using 80% debt. In 2011, debt financing reduced by 3% to 77%. In terms of debt to equity ratio, it is evident that in 2010 and 2011, the company had more debt than equity. However, in 2012, perhaps due to the reduction in debt financing, debt to equity ratio declined to 44%. The equity multiplier is above 4.4 for all the three years, reflecting a significant amount of debt in the company. similarly, the negative times interest earned and cash coverage ratios for the threeyear period implies that debt level in the company is too high to the extent that the company`s income cannot cover the interest expense. However, it is encouraging that the ratio has been declining year after year. 4.0 Turnover Ratios Turnover Ratios Inventory turnover Days` sales inventory Receivables turnover Days sales in receivables Total assets turnover Capital intensity 2010 38.46 7.72 9.47 0.11 1.59 0.63 2011 34.34 8.26 9.58 0.11 1.39 0.72 2012 32.34 8.86 8.59 0.11 1.20 0.83

Turnover ratios reflect the level of operational efficiency that Dell has. While inventory turnover ratios remained high in 2012 (32 times), it has been declining from year to year, an indication of reduced sales. The decline in receivables turnover from 2011 to 2012 by approximately one day is remarkable as it indicates improvement in debt collection, which

Surname enhances the company` liquidity. The company has maintained its days sales in receivables at 0.11, which indicates Dell`s efficiency in collecting its accounts. From 2010 to 2012, the day`s sales inventory has consistently increased implying that the number of days inventory remains on shelf before it is sold has slightly increased. Similarly, the total assets turnover has declined in the three-year period, indicating reduced efficiency in the way Dell manages its assets to generate sales. Finally, the capital intensity is at an acceptable level with the highest level of 0.83 in 2012. This implies that for each dollar worth of sales, the company uses $0.83. 5.0 Profitability Ratios Profitability Ratios Profit margin Return on assets Return on equity Net profit margin 2010 0.04 0.07 0.34 0.04 2011 0.06 0.08 0.39 0.06

2012 0.04 0.05 0.22 0.04

Profitability ratios indicate how well the company is managed. Dell`s profit margin and net profit margin from 4% to 6% from 2010 to 2011. However, in 2012, the ratios declined to 4%. The same trend is evident with respect to all the other profitability ratios. Return on equity has registered the best performance in the three-year period with the highest performance of 39% in 2011. The low profitability performance can be directly linked to Dell`s low net income over the same period. 6.0 Summary The analysis of Dell`s leverage position indicates that that the company is highly in debt. Even though the management is made efforts in reducing debt levels in 2012, there is need for increased effort in this direction. The high debt level is likely to scare away potential investors, and divert resources that would have otherwise been re-invested in the business. Similarly, from the liquidity analysis, Dell is a liquid company, suppliers and creditors should

Surname not worry about the company`s ability to meet its debt obligations. However, management should address the underlying factors that have caused a decline in these ratios year after year. In addition, From the analysis of the company`s turnover, Dell is in a good financial health position. However, the management should address the increasing cost of goods sold that is driving down the inventory turnover. Furthermore, From the analysis of Dell`s profitability, Dell is profitable. However, the company should improve its profitability and

eliminate fluctuations by reducing on debt given that interest expense has a negative effect on net income. The company should also reduce on its operating and non-operating expenses, as a whole Dell has a good financial health that needs to be improved.

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DELL Consolidated Income Statement Revenues TOTAL REVENUES Cost Of Goods Sold GROSS PROFIT Selling General & Admin Expenses, Total R&D Expenses OTHER OPERATING EXPENSES, TOTAL OPERATING INCOME Interest Expense Interest And Investment Income NET INTEREST EXPENSE Currency Exchange Gains (Loss) Other Non-Operating Income (Expenses) EBT, EXCLUDING UNUSUAL ITEMS Merger & Restructuring Charges Gain (Loss) On Sale Of Investments EBT, INCLUDING UNUSUAL ITEMS Income Tax Expense Earnings From Continuing Operations NET INCOME NET INCOME TO COMMON INCLUDING EXTRA ITEMS NET INCOME TO COMMON EXCLUDING EXTRA ITEMS 2010 61,494.00 61,494.00 50,041.00 11,453.00 7,302.00 661 7,963.00 3,490.00 -199 47 -152 4 -13 3,329.00 15 6 3,350.00 715 2,635.00 2,635.00 2,635.00 2,635.00 2011 62,071.00 62,071.00 48,211.00 13,860.00 8,524.00 856 9,380.00 4,480.00 -279 81 -198 5 -6 4,281.00 -49 8 4,240.00 748 3,492.00 3,492.00 3,492.00 3,492.00

2012 56,940.00 56,940.00 44,687.00 12,253.00 8,102.00 1,072.00 9,174.00 3,079.00 -270 100 -170 -18 -18 2,873.00 -67 35 2,841.00 469 2,372.00 2,372.00 2,372.00 2,372.00

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DELL Consolidated Balance Sheet Cash And Equivalents Short-Term Investments TOTAL CASH AND SHORT TERM INVESTMENTS Accounts Receivable Inventory Prepaid Expenses Finance Division Loans And Leases, Current Other Current Assets TOTAL CURRENT ASSETS NET PROPERTY PLANT AND EQUIPMENT Long-Term Investments Goodwill Other Intangibles Finance Division Loans And Leases, Long Term Other Long-Term Assets TOTAL ASSETS LIABILITIES & EQUITY Accounts Payable Accrued Expenses Short-Term Borrowings Current Portion Of Long-Term Debt/Capital Lease Finance Division Debt, Current Other Current Liabilities TOTAL CURRENT LIABILITIES Long-Term Debt Minority Interest Finance Division Debt, Non-Current Other Liabilities, Total TOTAL LIABILITIES Common Stock Retained Earnings Treasury Stock Comprehensive Income And Other TOTAL COMMON EQUITY TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 2010 13,913.00 452 14,365.00 6,493.00 1,301.00 374 3,643.00 2,287.00 29,021.00 1,953.00 704 4,365.00 1,495.00 799 187 38,599.00 2011 13,852.00 966 14,818.00 6,476.00 1,404.00 362 3,327.00 2,379.00 29,448.00 2,124.00 3,412.00 5,838.00 1,857.00 1,372.00 482 44,533.00

2012 12,569.00 208 12,777.00 6,629.00 1,382.00 446 3,213.00 2,671.00 27,968.00 2,126.00 2,577.00 9,304.00 3,374.00 1,349.00 842 47,540.00

11,293.00 11,656.00 1,550.00 1,604.00 1 1,503.00 578 924 272 440 2,102.00 1,704.00 19,483.00 22,001.00 4,318.00 5,467.00 --828 920 6,204.00 7,228.00 30,833.00 35,616.00 11,797.00 12,187.00 24,744.00 28,236.00 -28,704.00 -31,445.00 -71 -61 7,766.00 8,917.00 7,766.00 8,917.00 38,599.00 44,533.00

11,579.00 1,182.00 1,809.00 1,101.00 933 1,655.00 23,439.00 4,887.00 21 355 8,158.00 36,839.00 12,554.00 30,330.00 -32,145.00 -59 10,680.00 10,701.00 47,540.00