DELL'S WORKING CAPITAL

Harvard Business School Case 9-201-029

Case Software 2-201-703

Copyright 2000 by the President and Fellows of Harvard College

This case was prepared as the basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative situation.
Exhibit 1: Dells annual worldwide sales dollar growth versus industry

Calendar Year Della Industry

1991 63% -2%
1992 126% 7%
1993 43% 15%
1994 21% 37%
1995 52% 31%

a
Dells fiscal year closest in alignment to calendar year stated
Exhibit 2 : Working Capital Financial Ratios for Dell

DSI a DSO b DPO c CCC d

Q193 40 54 46 48
Q293 44 51 55 40
Q393 47 52 51 48
Q493 55 54 53 56
Q194 55 58 56 57
Q294 41 53 43 51
Q394 33 53 45 41
Q494 33 50 42 41
Q195 32 53 45 40
Q295 35 49 44 40
Q395 35 50 46 39
Q495 32 47 44 35
Q196 34 47 42 39
Q296 36 50 43 43
Q396 37 49 43 43
Q496 31 42 33 40

a
DSI (Days Sales of Inventory) = Net Inventory / (Quarterly C
b
DSO (Days Sales Outstanding) = Net Accounts Receivables
c
DPO (Days Payables Outstanding) = Accounts Payables / (Q
d
CCC (Cash Conversion Cycle) = DSI + DSO DPO
or Dell

(Quarterly COGS/90)
Receivables / (Quarterly Sales/90)
Payables / (Quarterly COGS/90)
Exhibit 3: Percent of Dell Computer Systems Sales by Microprocessor

Computer Systems FY94 FY95 FY96

386 models 7% 0% 0%
486 models 92% 71% 25%
Pentium models 1% 29% 75%
Exhibit 4: Profit & Loss Statements for Dell Computer Corporation

Fiscal Year 1996 1995

Sales $5,296 $3,475
Cost of Sales 4,229 2,737
Gross Margin 1,067 738
Operating Expenses 690 489
Operating Income 377 249
Financing & Other Income 6 (36)
Income Taxes 111 64
Net Profit 272 149

Profit Margin 5.14% 4.29%

Computer Corporation (millions of dollars)

1994 1993 1992

$2,873 $2,014 $890
2,440 1,565 608
433 449 282
472 310 215
(39) 139 67
0 4 7
(3) 41 23
(36) 102 51
Exhibit 5: Balance Sheets for Dell Computer Corporation (millions of do

Year Ended
January 28,
1996
Current Assets:
Cash 55
Short Term Investments 591
Accounts Receivables, net 726
Inventories 429
Other 156
Total Current Assets 1,957
Property, Plant & Equipment, net 179
Other 12
Total Assets 2,148

Current Liabilities:
Accounts Payable 466
Accrued and Other Liabilities 473
Total Current Liabilities 939
Long Term Debt 113
Other Liabilities 123
Total Liabilities 1,175
Stockholders Equity:
Preferred Stock (Note a) 6
Common Stock (Note a) 430
Retained Earnings 570
Other (33)
Total Stockholders Equity 973
2,148

a
1,190,000 shares of preferred stock converted to common stock in fiscal ye
oration (millions of dollars)

Year Ended
January 29, January 30,
1995 1994

43 3
484 334
538 411
293 220
112 80
1,470 1,048
117 87
7 5
1,594 1,140

403 NA
349 NA
752 538
113 100
77 31
942 669

120 NA
242 NA
311 NA
(21) NA
652 471
1,594 1,140

mmon stock in fiscal year 1996.

Exhibit 5a: Forecasted 1996 Balance Sheet

1995 Actual

Year Ended Percent of

1/29/1995 1995 Salesb
Current Assets:
Cash 43 1.2%
Short Term Investments 484 13.9%
Accounts Receivables, net 538 15.5%
Inventories 293 8.4%
Other 112 3.2%
Total Current Assets 1,470 42.3%
Property, Plant & Equipment, net 117 3.4%
Other 7 0.2%
Total Assets 1,594 45.9%

Current Liabilities:
Accounts Payable 403 11.6%
Accrued and Other Liabilities 349 10.0%
Total Current Liabilities 752 21.6%
Long Term Debt 113 3.3%
Other Liabilities 77 2.2%
Total Liabilities 942 27.1%
Stockholders' Equity:
Preferred Stocka 120 3.5%
Common Stocka 242 7.0%
Retained Earnings 311 8.9%
Other (21) -0.6%
Total Stockholders' Equity 652 18.8%

1,594 45.9%

Additional Funding Need

* Assumed to remain constant
** Growth due to projected net income at 1995 Profit Margin
a
1,190,000 shares of preferred stock converted to common stock in fiscal year 1996.
b
1995 Sales = 3,475
c
1996 Sales assumed to = 5,296
1996 Forecast

66
484 *
820
447
171
1,988
178
11
2,177

614
532
1,146
113 *
77 *
1,336

120 *
242 *
538 **
(21) *
879

2,215

(38)
scal year 1996.
Table A: Days Supply of Inventory (DSI)

1993 1994 1995

Dell Computer 55 33 32
Apple Computer 52 85 54
Compaq Computer 72 60 73
IBM 64 57 48