Dell Inc. Investment Strategy Harvard Case Solution & Analysis

Introduction

Dell has been the multinational computer technology company that was founded in the United States. The company basically manufactures, sells, repairs and also supports computer systems and other related products. The company was founded by Michael Dell which has more than 100,000 employees worldwide. Dell was launched in 1984 and since then the company has been one of the major corporations that has been dealing in computer business. The major competitors for the company Dell are Apple Inc. HP, Acer Inc. and the Lenovo. The model of business that the company follows within the company is to deliver high quality products to the customers.

Question 1

What is your assessment of Dell's performance and financial health?

The financial performance of Dell Corporation is evaluated based on the financial exhibits provided in the case which actually identify the financial health and performance of the company. To analyze the Dell Corporation performance and financial health, following analyses will judge the financial health and performance of the company.

Liquidity Ratios

The cash and the market security to the overall asset ratio for the Dell Corporation in the year 2008 has decreased when competed to the preceding year. Alogn with this, the cash and the market security for the company has been 0.40x for the total asset ratio which has reduced to 0.29x which indicates that the company does not have sufficient liquid assets which can be converted in to the case form. The current ratio for the company during the time period of 2008 is 1.07x which was more in the previous where the current ratio was 1.12x.

This reduction in the current ratio of the company has indicated that the current assets for Dell Corporation have decreased which actually support in paying off the current liabilities for the company. The acid ratio for Dell has also reduced in the same period which again indicates the decline in the overall liquidity ratios for Dell Corporation. Therefore, it can be said that the company Dell Corporation is not performing upon the required standards. Alogn with this, the decline in liquidity ratios actually conclude that the company cannot grow and increase productivity because of the decline in its liquidity ratios. Please refer to exhibit 10 to view the liquidity ratios for Dell.

Valuation Metrics Analysis

As per the data provided in the financial exhibit 9, it indicates that the valuation metric and the economic data analysis explains that the overall performance of Dell Corporation has not been up to the satisfactory mark. The share price of Dell has decreased in 2008. Alogn with this, exhibit 9 indicates that the share prices for the company in 2007 was $22.85 which has reduced to $19.90 in 2008.

This indicates the dip and fall in the overall share price and the financial stability of the company. Alogn with this, the EPR has also reduced to 15.2 since 2007, where the EPR was 20.1. Similarly, the book ratio for the company has remained constant which again explains that the performance of the company is questionable when compared to the competitors in the market.

Profitability

When analyzing the exhibit 4, it can be seen that the growth in the revenue ratio of Dell showed a decline during the year 2008. The revenue ratio in 2005 increased when compared to the previous year, but since the year 2005 the revenue ratio has been on a constant decline since then. It has reached to 6.5%. Alogn with this, the return on equity ratio and the return on assets have increased in 2008 which was less in the previous years.

The gross profit margin for the company have increased in the year 2007. Along with this, the return on equity ratio in the year 2008 has increased to 77% which was around 58% in the year 2007. This basically indicates that the company has earned sufficient returns by the company for the investors. Return on asset ratio in the year 2007 was around 10% which has increased to 10.7% in the year 2008 please refer to exhibit 10 ........................

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