Dell Computer Corp. manufactures, sells, and services PC's. The organization marketplaces its computer systems straight to its clients and develops computer systems after getting a customer order. This build-to-order model allows Dell to possess much more compact purchase of working capital than its rivals. Additionally, it allows Dell to more fully enjoy the advantages of decrease in component prices and also to introduce new items more rapidly. Dell is continuing to grow rapidly and it has had the ability to finance that growth internally by its efficient utilization of working capital and it is profitability. This case highlights the significance of working capital management inside a quickly growing firm.
Balance Sheet, Income Statement, Cash Flows 1996, Cash Flows 1997, Working Capital, Projections 1994, 1995, 1996
How was Dell working capital policy a competitive advantage?
How did Dell fund its 52% growth in 1996?
Assuming Dell sales will grow 50% in 1997, how might the company fund its growth internally?
How much would working capital need to be reduced and/or profit margin increased?
What steps do you recommend the company take?
How would your answers to Question 3 change if Dell also repurchased $500 million of common stock and repaid its long-term debt?