Dell was able to fund 52% growth in 1996 and anticipated 50% growth in 1997 through its working capital advantages like low inventory, quick adaptability, and customer-tailored manufacturing. It estimated it needed $447 million more in operating assets to support the 1996 growth. Dell funded this primarily through liabilities and equity on its balance sheet. For the projected 50% growth in 1997, Dell could liquidate some short-term investments and reduce working capital, but may need to take on additional short-term debt of $399 million to fully fund the anticipated growth while also repurchasing $500 million in stock and repaying debt.

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?