Financial Accounting: Dell Corporation's case - Essay Example

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This paper will compare ten ratios of Dell against the performance of one of its main competitors, Hewlett Packard. A table illustrating a ratio analysis of Dell and Hewlett Packard is illustrated in the following paper…
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Financial Accounting: Dell Corporations case
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Download file to see previous pages The firm’s total liability increased a bit in comparison with the previous year. The total equity of the firm in 2011 was $7.76 billion. The net margin of Dell in 2011 was 4.28%. This metrics measures the profitability of the company (Besley & Brigham, 2000). One of its competitors Hewlett Packard had a net margin of 6.95%. The profitability performance of Dell is inferior to Hewlett Packard. The industry net margin average is 5.30% (Dun & Bradstret, 2011). The net margin of Dell was 1.02% below the industry average. The return on assets of Dell is fiscal year 2011 was 6.83%. Return on assets measures how well assets have been employed by the company (Garrison & Noreen, 2003). A high return on assets number is a desirable outcome. The return of assets of Hewlett Packard was 7.04%. The return on assets of HP is 0.21% higher than Dell. The industry average return on assets is 5.8%. Dell’s return on asset performance is 1.03% better than the industry average. The return on equity of Dell is fiscal year 2011 was 33.93%. During the equivalent financial period Hewlett Packard has a return equity of 6.95%. The return on equity metric measures the extent to which financial leverage is working for or against common stockholder (Garrison, et. al., 2003). The average return on equity in the computer industry is 8.10%. The return on equity of Dell Corporation was 4.18 times higher than the industry average. The current ratio of Dell in fiscal year 2011 was 1.49. The current ratio measures the ability of a company to pay off its short term debt (Investopedia, 2011). The general rule to evaluate a current ratio is for the current ratio to be above 1.0. Since Dell has a current ratio 0.49...
The researcher tells that the computer industry was born in the late 1970’s. This innovation changed the world forever as it allowed human to process and store information faster. A company that has had a lot of success in this industry is Dell Corporation. Dell was founded 26 years ago by Michael Dell. Through the 1990’s Dell became the market leader in the computer industry due to its innovative supply chain model which eliminated the intermediary and sold directly to the customer. Today the computer industry has become more competitive than ever. Ratio analysis is a tremendous tool to evaluate the financial performance of a company. The five categories of ratio analysis are liquidity, financial leverage, asset efficiency, profitability, and market value ratios. In order to determine how good a financial ratio is the ratios must be compared against a benchmark company or against the industry standard ratio. A database that provides information regarding the business ratios of specific industries is the Dun & Bradstreet database. Dell Corporation had a solid financial performance in fiscal year 2011. Its revenues and net income increased by 16.24% and 83.91% respectively. The ratio analysis performed had more positive than negatives metrics. HP was chosen as the benchmark company for comparison reasons. The net margin of the company was lower than both HP and the industry at 4.28%. Dell’s performance is both ROA and ROE were good. The ROE of the firm is outstanding at 33.93%. Dell’s ROE is 4.18 better than the industry average. ...Download file to see next pagesRead More
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