Operations And Legacy Of The Dell Corporation

1798 words - 7 pages

Portfolio Project – Dell, Inc.
Dell, Inc.’s origins date back over 25 years ago when it was founded under the company name PC’s Limited (Edwards, 2007). This once small company got its start when founder Michael Dell began building personal computers for students at the University of Texas. Today, Dell has developed its product line to offer more than computers; they also sell entertainment and office equipment. Dell’s leadership, guided by the corporate code of conduct, has shown a clear commitment to environmental matters and frequently publicizes the ways in which the company has developed new techniques to reduce the company’s energy use and product waste (“Latest update,” 2010). The main reason for Dell’s success is their ability to manage the financial health of their company. This success is reflected in the firm’s financial statements.
There are three main financial statements that should be evaluated to understand the financial status of a firm – the balance sheet, the income statement, and the firm’s statement of cash flows (Keown, Martin, & Petty, 2011). The balance sheet provides a snapshot of the firm’s financial position on a particular date and includes information about the firm’s assets, liabilities, and shareholders’ equity. This particular financial statement is an overview of what the firm owns and what the firm owes (“Beginners’ guide to financial statements,” 2007). An analysis of Dell’s current balance sheet shows that they have approximately $40 million in assets - of which $29 million are current assets. This means that the firm expects to turn this amount of current assets into cash within the next 12 months (Keown, Martin, & Petty, 2011). Further analysis of Dell’s balance sheet reveals that the firm has used more debt (liabilities) than equity to finance its assets. Liabilities are often referred to as debt capital and are divided into “current or short-term debt and long-term debt” (Keown, Martin, & Petty, 2011, p. 56). Dell’s liabilities are listed on the balance sheet at over $30 million. The firm’s current liabilities (debt) are calculated to be just under $20 million. Similar to current assets, the firm expects to repay its current debt within the next 12 months. The firm’s shareholder equity is the money invested by owners in the firm’s stock plus or minus the firm’s earning since its inception. Shareholders’ equity is the amount owners invested in the company’s stock “plus or minus the company’s earnings or losses” since inception (“Beginners’ guide to financial statements,” 2007, para. 12). The firm’s net working capital and debt ratio can also be calculated from the figures on the balance sheet. Dell’s net working capital is $9.5 million -- equation: $29,021,000 - $19,473,000 (“Annual report,” 2011). The more net working capital a firm has, “the more able a firm will be able to pay its debt as it comes due (Keown, Martin, & Petty, 2011, p. 59). Net working capital is important to the firm’s lenders as it...

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