business strategy
Asset Utilization Ratios
Average collection period = A.R / (sales/365) 41.89607 37.67742 Days
Inventory Turnover = cost of goods sold / inventories 51.78388 51.2711
We are given the balance sheet for only two years whereas income statement is of four years. So it is pretty difficult for us to find the ratios for previous years like 1998, 1997.
But by looking at the revenues row we say that there are very high percentage chances that the company will be doing well in coming years.
In the previous years the company has been performing well. Its revenues have been increasing. Let’s look at the year to year increase in revenues. Revenues increased by 37% from 1997 to 1998, 32% from 1998 to 1999 and 27% from 1999 to 2000. The revenue is increasing but in a declining rate because the industry is has experienced a slump especially technology and PC industry. Prices have come down so these are few reasons why revenues increasing rate has come down but Dell is still doing better than its competitors.
Cost of generating revenue from 1997 to 1998 was 36.5%, 32% from 1998 to 1999 and 29.5% from 1999 to 2000. This suggests that not only revenue increasing rate has declined but also the rate of cost for generating revenue has come down. This represents a health picture of a company which has [next page]