Dell Working Capital

1992

1993

1994

1995

890 608 282 215 67 7 23 51

2014 1565 449 310 139 4 41 102

2873 2440 433 472 -39 0 -3 -36

3475 2737 738 489 249 -36 64 149

Operating Assets

1995

1996

1997 40%

1997 50%

Total Assets Short Term Investments Total Operating Assets

1594 484 1110

2148 591 1557

2257.65

2413.35

Sales COGS Gross Profit Operating Expense Operating Income Finance & Other Income Income Taxes Net Profit

Average Age of Inventory DSI Average Collection Period DSO Average Paying Period DPO

34.5 47 40.25 1994

Cash Inventory Accounts Receivable Accounts Payable Net Working Capital Changes in Net Working Capital Net Profit Retained Earning Beginning Required Funds

43 293 538 403 471

1996 55 429 726 466 744 273 272 311 161

45%

1997 55%

55 746.3096 1279.124 905.1945 1175.24 431.2395 320.28 311

55 827.3654 1417.409 999.7597 1300.01 556.0147 342.9 311

543.96 646.115

In 1997, Dell Net Profit and RE can not cover its working capital. So, in order to funding its work internally, they need to adjust their working capital by, (1) Speeding up the turnover of Inventory, (2) Speeding up the collectin of working capital, and (3 payment of accounts payable as long as possible Current

Proposed 55% 34.5 29 30 47 39 40 40.25 40.69894 44.72629 45%

Average Age of Inventory Average Collection Period Average Paying Period Cash Conversion Cycle

27.30106 25.27371

When doing the proposed effeciency in use of working capital, the required funds needed for worki

1996 5296 4229 1067 690 377 6 111 272

45% 7679.2 6132.05 1547.15 1000.5 546.65 6 221.06 331.59

1997 55% 8208.8 6554.95 1653.85 1069.5 584.35 6 236.14 354.21

65% 8738.4 6977.85 1760.55 1138.5 622.05 6 251.22 376.83

1. COGS & Operating Expense increase prop 2. Finance & Other income remain the same 3. Tax 40%

471 322 1997 60%

2569.05

1997 65% 55 908.4213 1555.693 1094.325 1424.79 680.7898 365.52 311 748.27

, in order to funding its working capital ng capital by, tin of working capital, and (3) Delay the s possible

Proposed

Proposed Working Capital Reduction of Working Capital 45% 55% 65% 45% 55% 65% 30 558.9414 663.4917 733.975 187.3682 163.8738 174.4463 40 937.8267 1098.178 1215.867 341.2978 319.2311 339.8267 46.28617 920.4885 1162.77 1328.322 15.29403 163.0101 233.9971 543.96 646.115 748.27 23.71383 65%

uired funds needed for working capital can be fulfilled

xpense increase proportionally towards sales ome remain the same

Operating Assets

1995

1996

Total Assets Short Term Investments Total Operating Assets Required Funds

1594 484 1110

1594 403 1191

Sources of Funds (1996) Total Liabilites & Equity Accounts Payable Total L&E Exclude AP Increase Net Profit Cash Inflow

1997 40%

1997 50%

2148 591 1557 447

2179.8 622.8

2335.5 778.5

2148 466 1682 491 272

2438.9 756.9 320.28

2607.1 925.1 342.9

763

1077.18

1268

1997 60%

2491.2 934.2

2775.3 1093.3 365.52 1458.82