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    Dell Working Capital

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    sankul5
    The document analyzes Dell's actual 1996 financial performance compared to projections, and forecasts Dell's potential 1997 financial position. In 1996, Dell funded 52% sales growth largely through increased asset efficiency and profitability, with operating assets at 29% of sales versus a projected 32%. Actual 1996 cash flow exceeded projections by $58 million. To fund projected shortfalls in 1997, Dell would need to improve profit margins, working capital management, or a combination of both.

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    Dell Working Capital

    Uploaded by

    sankul5
    527 views12 pages
    The document analyzes Dell's actual 1996 financial performance compared to projections, and forecasts Dell's potential 1997 financial position. In 1996, Dell funded 52% sales growth largely through increased asset efficiency and profitability, with operating assets at 29% of sales versus a projected 32%. Actual 1996 cash flow exceeded projections by $58 million. To fund projected shortfalls in 1997, Dell would need to improve profit margins, working capital management, or a combination of both.

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    The document analyzes Dell's actual 1996 financial performance compared to projections, and forecasts Dell's potential 1997 financial position. In 1996, Dell funded 52% sales growth largely through increased asset efficiency and profitability, with operating assets at 29% of sales versus a projected 32%. Actual 1996 cash flow exceeded projections by $58 million. To fund projected shortfalls in 1997, Dell would need to improve profit margins, working capital management, or a combination of both.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    527 views12 pages

    Dell Working Capital

    Uploaded by

    sankul5
    The document analyzes Dell's actual 1996 financial performance compared to projections, and forecasts Dell's potential 1997 financial position. In 1996, Dell funded 52% sales growth largely through increased asset efficiency and profitability, with operating assets at 29% of sales versus a projected 32%. Actual 1996 cash flow exceeded projections by $58 million. To fund projected shortfalls in 1997, Dell would need to improve profit margins, working capital management, or a combination of both.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    of 12

    Incremental Sales in 1996 Addnl. Operating Assets (32%) (Total Assets - ST Invest.

    In USD M 1,821 582

    5296 52% 4.29% 227

    Forecasted 1996 Balance Sheet (In USD M) 1995 Actual Y.E. Jan 29, 1995 % 0f 1995 Sales Current Assets: Cash ST Investments A/R, net Inventories Other Total Current Assets P, P & E, net Other Total Assets Addnl. Funding Needed Current Liabilities: A/P Accrued & Other Liabilities Total Current Liabilities Long Term Debt Other Liabilities Total Liabilities Stockholders' Equity: Preferred Stock Common Stock Retained Earnings Other Total Stockholders' Equity 43 484 538 293 112 1,470 117 7 1,594 1.24% 13.93% 15.48% 8.43% 3.22% 42.30% 3.37% 0.20% 45.87% 31.94%

    403 349 752 113 77 942

    11.60% 10.04% 21.64% 3.25% 2.22% 27.11%

    120 242 311 -21 652 1,594

    18.76% 45.87%

    As of 1995, Dell would be projected to be able to grow at 52% without increasing its leverage and Actual 1996 Balance Sheet Compared to Projections Y.E. Jan 28, 1996 Current Assets: Cash ST Investments A/R, net Inventories Other Total Current Assets P, P & E, net Other 29% Total Assets

    Forecast for 1996 Fixed Liabilities 66 484 820 447 171 1,987 178 11 2,176

    55 591 726 429 156 1,957 179 12 2,148

    Addnl. Funding Needed Current Liabilities: A/P Accrued & Other Liabilities Total Current Liabilities Long Term Debt Other Liabilities Total Liabilities

    354

    466 473 939 113 123 1,175

    403 349 752 113 77 942

    Stockholders' Equity: Preferred Stock 6 Common Stock 430 Retained Earnings 570 Other -33 49 Total Stockholders' Equity 973 879 Common stock to employees 2,148 2,176 5.10% 45 227 Dell internally funded a 52% growth in sales largely by increasing its asset efficiency and profitab

    of Sales in 1996, as compare 924 49

    additional equity issued

    Growth in 1996 sales Actual net profit margin in 1995

    4.29% 227 227

    2,176 Forecast for 1996 with Actual 1996 Sales Fixed Liabilities 66 484 820 447 171 1,987 178 11 2,176 354

    1,692 582

    403 349 752 113 77 942

    879 2,176

    ithout increasing its leverage and issuing further equity shares.

    Variance

    Y.E. Jan 28, 1996 Proportional Liabilities -11 107 -94 -18 -15 (30) 1 1 (28) 55 542 726 429 156 1,957 179 12 2,148

    63 124 187 46 233

    466 473 939 113 123 1175

    94 (28)

    6 430 570 -33 973 2148

    ng its asset efficiency and profitability. Total Operating assets at 29% of Sales in 1996, as compared to projected 32%

    5.1% vs. 4.3%

    1995 Actual Net Profit Margin Projected Net Profit for 1996

    tual 1996 Sales Prop. Liabilities 66 484 820 447 171 1,987 178 11 2,176 (80)

    582 (80)

    614 532 1,146 113 117 1,376

    211

    879 2,176

    Forecast for 1996 Variance Proportional Liabilities 66 484 820 447 171 1,987 178 11 2,176 -11 58 -94 -18 -15 -30 1 1 -28

    -135

    107

    135

    582 447

    58 Extra Actual Funding in 1996

    (80) forecast vs. actuals -67 17.7% 46

    614 532 1146 113 117 1376

    -148 -59 -207 0 6 -201

    63 124

    505 Total Increase in Funding in 1996

    879 2,176

    94 (28)

    973

    45

    272 Increase in Equity w/o 49 -22

    5.14% NP Margin 1996 20.15% GP Margin 1996 21.24% GP Margin 1995

    Extra Actual Funding in 1996

    Total Increase in Funding in 1996 over 1995

    n Equity w/o 49

    Addnl. Sales Addnl. Operating assets Actual 1996 Sales Gross Margin Forecasted 1997 Balance Sheet (In USD M) 1996 Actual

    Y.E. Jan 28, 1996 Current Assets: Cash ST Investments A/R, net Inventories Other Total Current Assets P, P & E, net Other Total Assets Addnl. Funding Needed Current Liabilities: A/P Accrued & Other Liabilities Total Current Liabilities Long Term Debt Other Liabilities Total Liabilities Stockholders' Equity: Preferred Stock Common Stock Retained Earnings Other Total Stockholders' Equity 55 591 726 429 156 1,957 179 12 2,148

    466 473 939 113 123 1,175

    6 430 570 -33 973 2,148 44 days of sales 56 days of COGS

    To fund the shortfall of 984 M through increased asset efficiency, Dell needs

    Current CCC (Cach to Cash Cycle) 40 days CCC has to become negative to fund the shortfall of 984 M HOW? Savings from Hypothetical WC improvements DSI Q4 1996 Actual Hypothetical improvements 1997 Projected Hypothetical improvements * Daily Savings 31 -17 14 17 17.6

    Annual Savings Total Savings in USD M

    299.55 983

    Improvement in Profitability in 1997 can also eliminate the shortfall of 984 M - 1% increase in margin will inc Margin improvements reduce the required working capital improvements as above - A combination of both seems to be the only reasonable alternative to fund the shortfall. Repurchase of Stock indicates under valuation in the market and leads to increase in value. Actual profit margin 1997

    Actual 1997 CCC

    13

    2,648 779 5,296 20.15% 1996 Actual

    % 0f 1996 Sales 1% 11.2% 14% 8% 3% 37.0% 3.4% 0.2% 41% 29.40%

    408 Projected 1997 Net Profit 5.1% 7,944 Projected 1997 Sales 7,944 1,601 1,601 Projected Gross Profit 22.1 45 Daily COGS 17.6 56 Forecast for 1997 with a 50% Sales Increase Debt repaid & $500 Equity Fixed Liabilities Prop. Liabilities Buyback 83 591 1,089 644 234 2,640 269 18 2,927 371 83 591 1,089 644 234 2,640 269 18 2,927 (161) 83 591 1,089 644 234 2,640 269 18 2,927 984

    779

    9% 9% 18% 2% 2% 22%

    466 473 939 113 123 1,175

    699 710 1,409 113 185 1,706

    466 473 939 123 1,062

    18% 41%

    1,381 2,927

    1,381 2,927

    881 2,927

    DSO 42 -15 27 15 22.1

    DPO 33 20 53 20 17.6

    CCC 40 -52 -12

    331.00 904

    352.42

    ll of 984 M - 1% increase in margin will increase net income by 79 M. ements as above - A combination of both profitability & WC improvements

    leads to increase in value. 6.68% 7759 M sales, 518 M ST Inv. Increased to 1237 M from 591 M LT debt reduced to 18 M from 113 M Common stock reduced from 430 M to 195 M Inventories 251 M 903 M A/C Rec., 1040 M A/c payable 37 54 (4)

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