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Income Balance of Dell Inc - Essay Example

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Summary

The essay "Income Balance of Dell Inc" focuses on the critical analysis of the major issues in the income balance of Dell Inc. The formula for calculating ROE using the DuPont Formula is elaborated. The information is extracted from the financials of Dell Inc…

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Subject: Finance & Accounting
Type: Essay
Level: Undergraduate
Pages: 1 (250 words)
Downloads: 3
Author: audrey88

Extract of sample "Income Balance of Dell Inc"

The Financial Leverage calculated from the above details for the three years has been shown below:

Calculation of Ratios

2013

2012

2011

Financial Leverage

4.451

4.994

4.970

From these calculations, the Return on Equity (ROE) using the DuPont Method will be calculated:

Calculation of Ratios

2013

2012

2011

Net Profit Margin

4.17%

5.63%

4.28%

Asset Turnover

1.198

1.394

1.593

Financial Leverage

4.451

4.994

4.970

DuPont Ratio (ROE)

22.21%

39.16%

33.93%

The DuPont analysis is very effective in assessing the performance of the company. If the company’s performance is unsatisfactory then which part of the business is underperforming can be identified using this formula.

The ROE of Dell Inc. has fallen in 2013 as compared to 2012. The decrease in the ROE has been observed due to the operating inefficiency of the company. This is assessed from the Net Profit Margin of the company. The Asset turnover of the company has improved over the years. The Decrease in the Financial Leverage ratio is a good sign for the company.

Analyzing the ROE of Dell Inc., the company must take measures to improve its Net Profit Margin. Improving the operating efficiency will increase the returns of the company.

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