Cash & Credit Analysis

1. Cash and Credit Management
Dell computers
Presentation by
Artur Turdiev Daniel Galdo Dennis Leutwiler Renars Gencs

2. How dells working capital is an advantage
Innovative – Direct
Sales
Bypassing middlemen –
saving costs and time
Listening to
customers - Birth of
build to order
Eliminating need for
pre-build & storage

3. How dells working capital is an advantage
• Short CCC
• Low inventory, meaning lower storage costs
• Quick adaptability to market changes
• Obsolescence risk mitigation (components losing
value quickly)
• Tailoring to customer’s needs

4. How did dell fund its 52% growth in 1996
From the balance sheet we estimate based on expected growth rate,
historical growth rate, profit ratio, etc.
Calculate changes in operating assets
2148-591-1594+487= 447m increase in operating assets and amount
needed for funding

5. How did dell fund its 52% growth in 1996
How did dell fund their 447 million increase?
Answer in their liabilities & equity
Greatest indicators of funding

6. Assuming Dell sales will grow 50% in 1997
Internal funding methods – Available options
o Liquidating short-term investments
o Liquidating PPE
o Working capital reduction
See attached excel
How much working capital needed to be reduced / profit margin increase

7. Q.3 with a repurchase of 500m common stock and
repayment of debt
Funds needed for stock buyback, debt repayment and funds for 50% growth
=
1.392 billion
With most short term investments liquidated to fund 50% growth internally company would need to
be:
Very strict on their A/R policy
Work on a cash basis
And an extremely efficient JIT
additional $399m (1392-402-591=399) needed after liquidation of short term
Alternatively raise funds through short term debt

8. Presentation by
Artur Turdiev Daniel Galdo Dennis Leutwiler Renars Gencs
Thank you!
Questions?