APPLE & DELL
Financial Analysis Project
INTRODUCTION
Dell and Apple are American companies that participate in the industry of Electronic Computers, according to the SIC 3571. This industry is oriented to the manufacture of diverse kind of data processing systems. In 2001, the largest computer makers in the United States were Dell, Compaq, Hewlett-Packard and IBM. They produced about 40 percent of personal computers shipments in the world according to International Data Corporation (IDC). Dell is positioned as the bigger competitor, but in 2002, Hewlett-Packard acquired Compaq, challenging Dell’s leadership in this sector. (1)
The computer industry is organized in several categories such as supercomputers, mainframes, midrange …show more content…
The industry has to maintain low inventory levels because the rate of depreciation is high and in consequence for each day a computer stayed in the warehouse the computer loses 1% of it value. (17)
As Dell's CEO, Kevin Rollins said:
"The longer you keep it the faster it deteriorates -- you can literally see the stuff rot," he says. "Because of their short product lifecycles, computer components depreciate anywhere from a half to a full point a week. Cutting inventory is not just a nice thing to do. It's a financial imperative." (17)
It is important to consider that Dell has a competitive advantage in cost due to its just in time inventory policy, this shorten the time took for Dell to get new generations of its computer models into the marketplace.(18)
The inventory turnover in both companies decreased because of the increment of their inventory mentioned above and also for the account receivables decreased this is not beneficial for the companies and affect their current ratio. …show more content…
Dell is trying to expand beyond its roots in laptop and desktop computers to higher margin products like servers and data storage for corporations; that is why in 2010 they acquire of a company named 3PAR (a provider of information storage systems) for $1.5 billion dollars in cash. Dell’s debt is mainly because of the acquisition of several storage information companies. (19) (20)
“In another industry move announced last week, Dell said that it would invest $1 billion over the next two years to build 10 new data centers and expand customer support, largely for cloud offerings.” (22)
Interest coverage ratio (ICR)
During 2010 and 2009 Apple had no debt outstanding and accordingly did not incur any related interest expense.(23) Dell by the other hand increased its interest coverage by 30%, this means that Dell has a good financial health and is capable to meet its interest obligations from operating earning. A low ICR means that the company has less earning to cover its interest payment but this doesn't apply to Apple, as they do not have any debt outstanding
Return on common stockholder's equity (ROE)
The average ROE is about 10%-15%, a high ROE does not mean a good financial performance of the company. Both Apple and Dell have a good Return on Equity because they have a high financial leverage but this is not too high to put on risk the company's
Financial Analysis Project
INTRODUCTION
Dell and Apple are American companies that participate in the industry of Electronic Computers, according to the SIC 3571. This industry is oriented to the manufacture of diverse kind of data processing systems. In 2001, the largest computer makers in the United States were Dell, Compaq, Hewlett-Packard and IBM. They produced about 40 percent of personal computers shipments in the world according to International Data Corporation (IDC). Dell is positioned as the bigger competitor, but in 2002, Hewlett-Packard acquired Compaq, challenging Dell’s leadership in this sector. (1)
The computer industry is organized in several categories such as supercomputers, mainframes, midrange …show more content…
The industry has to maintain low inventory levels because the rate of depreciation is high and in consequence for each day a computer stayed in the warehouse the computer loses 1% of it value. (17)
As Dell's CEO, Kevin Rollins said:
"The longer you keep it the faster it deteriorates -- you can literally see the stuff rot," he says. "Because of their short product lifecycles, computer components depreciate anywhere from a half to a full point a week. Cutting inventory is not just a nice thing to do. It's a financial imperative." (17)
It is important to consider that Dell has a competitive advantage in cost due to its just in time inventory policy, this shorten the time took for Dell to get new generations of its computer models into the marketplace.(18)
The inventory turnover in both companies decreased because of the increment of their inventory mentioned above and also for the account receivables decreased this is not beneficial for the companies and affect their current ratio. …show more content…
Dell is trying to expand beyond its roots in laptop and desktop computers to higher margin products like servers and data storage for corporations; that is why in 2010 they acquire of a company named 3PAR (a provider of information storage systems) for $1.5 billion dollars in cash. Dell’s debt is mainly because of the acquisition of several storage information companies. (19) (20)
“In another industry move announced last week, Dell said that it would invest $1 billion over the next two years to build 10 new data centers and expand customer support, largely for cloud offerings.” (22)
Interest coverage ratio (ICR)
During 2010 and 2009 Apple had no debt outstanding and accordingly did not incur any related interest expense.(23) Dell by the other hand increased its interest coverage by 30%, this means that Dell has a good financial health and is capable to meet its interest obligations from operating earning. A low ICR means that the company has less earning to cover its interest payment but this doesn't apply to Apple, as they do not have any debt outstanding
Return on common stockholder's equity (ROE)
The average ROE is about 10%-15%, a high ROE does not mean a good financial performance of the company. Both Apple and Dell have a good Return on Equity because they have a high financial leverage but this is not too high to put on risk the company's