The Analysis of Dell Incorporated - Assignment Example

Dell states, in their SEC Form 10-K, that their business strategy “combines its direct customer mood with a highly efficient manufacturing and supply chain management organization and an emphasis on standards-based technologies. This strategy enables Dell to provide customers with superior value; high-quality, relevant technology; customized systems; superior service and support; and products and services that are easy to buy and use.” From just looking at the business strategy it shows that Dell, Inc. is a business that thrives off customer intimacy with the ability to make the right product for the customer and the customer alone.

As with any company, some risks will threaten their ability to appease their stockholders. Some of these risks include drops in the economy which affect net revenue; drop in international sales; infrastructure failures; loss of government contracts; wars, terrorism, natural disasters, and public health scares. There are controls out there for every one of these situations. Keeping prices reasonable here and overseas will make sure that even a dip in the global economy will not affect the sales too bad. Furthermore, evaluations of personnel, equipment, and property will also ensure that there are no infrastructure failures. For government contracts, keep your bids a little lower than the competitors, this will also help out when wars, terrorism, natural disasters, and public health scares threaten profits.

The SOX Act of 2002 affects every major corporation stating that everybody on the board is held accountable with the CEO, Chairman of the Board signing off on the finalized SEC 10-K Forms each year. This affects the disclosures by telling Dell that they must report accurately since a third party will audit the records to see if they are off. Furthermore, it affects the disclosures by making sure that Dell keeps everything on the straight and narrow.

And whether or not Dell is a manufacturer or merchandiser, truthfully in the best sense it is both. However, Dell is more concerned with its manufacturing than merchandising, thus making it a merchandiser. This can all be seen through the types of risks upon their SEC Form 10-K, i.e. reliance on supplies, and disruptions in component availability. (Dell, 2005)

There are also costs for everything which can be inventoried. These costs can be both identified as direct or indirect costs. Direct inventoriable costs would include components, research and development projects, and products ready for shipping. On the other hand, indirect costs would include things such as equipment, property, and plants. As the net revenue has increased, so has the gross margin but at a slower rate of increase due to the cost of revenue increasing right along with it.

As for the inventory balance, the end of the 2005 fiscal year shows $459 million. This is low due to the minimal amount of inventory that Dell keeps in stock. Everything is customized for the consumer. Once you look at their crash conversion it is always negative, due to the length of time it takes to receive revenues from the international sales. Truly this is not a bad sign since it already shows on the books.

Also, some of the variable operating costs are the plant, property, and equipment; research, development, and engineering; shipping costs; and selling, general, and administration costs. Direct costs of the categories are vastly similar to one another. The direct expenses include administration, payroll, contractor fees, infrastructure costs, insurance, legal, and human resources. Furthermore, indirect expenses include the increase of expenses, property, and time.

In conclusion, this paper has shown through analysis of the 10-K Form filed by Dell in 2005 that they are well aware of what is going on and how they are making money. They are also staying on track to keep themselves in a position to increase their revenue even when the economy goes into a downturn. Dell, Inc. has planned for the future emphasizing reliance, timeliness, and future sales, while being less on precisely calculating what they should have come in. (Noreen, Brewer, & Garrison, 2010).