Dell working capital case study answers

Dell case study harvard business school answers

It matters! Short-term investments are assumed to be constant. With its importance, though, there are many challenges. Lower inventory obsolescence costs as a percentage of sales helped to mitigate some of the gross margin erosion. Diagrams and tables do not count as part of the three pages of text. These new disruptive technologies are a cheaper and thus more accessible substitute to the old guard laptops and PCs. The lower inventory losses for Dell imply higher profits.

Although it is unlikely that Dell could fully fund the repayment and equity repurchase through margin improvements alone, the margin improvements reduce the required working capital improvements.

What can we learn from this case?

Dell working capital scribd

Exhibit TN-5 contains an example of projected improvements that would eliminate the projected capital shortfall resulting from the debt repayment and equity repurchase through improvements in working capital. In fact, during Q4 , Dell paid its suppliers 11 days faster than a year earlier. Margin Performance. Dell has grown quickly and has been able to finance that growth internally by its efficient use of working capital and its profitability. What types of decisions need to be made? If profit margins of 4. There are many reasons why minimizing working capital is important. Students generally doubt that it is possible for Dell to realize such an increase in working capital efficiency. Working capital management entails short-term financial decision making. Substantive Issues Dell manufactures, sells, and services personal computers. Students should also explore the benefits or repaying the debt and the equity repurchase.

The primary source of funding was from the issuance of common stock to employees. Exhibit TN-5 contains an example of projected improvements that would eliminate the projected capital shortfall resulting from the debt repayment and equity repurchase through improvements in working capital.

Students should also explore the benefits or repaying the debt and the equity repurchase. But if the company takes too long to pay its creditors, the creditors will be unhappy.

The gross margin decline was attributed to aggressive pricing strategies and an account mix shift from major accounts such as corporations and government agencies to lower margin customers such as small-to-medium businesses and consumers.

working capital assessment case study

The second liability assumption in Exhibit TN-4 is that liabilities remain at sales ratios. Dell has grown quickly and has been able to finance that growth internally by its efficient use of working capital and its profitability.

dell cash conversion cycle

They may refuse to extend credit in the future, or they may offer less favorable terms.

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Dell's Working Capital