Analysis Of Dell And Hp Based On Different Types Of Ratio Analysis

815 Words Apr 5th, 2015 4 Pages
Ratio Analysis is a method of assessing a firm’s financial situation by comparing two sets of linked data.
Company Profile:

HP and Dell are both multinational companies that specializes in computer/technology industry. Currently, HP is recognized as the world’s top PC manufacturer which is operating nearly in every country. On the other hand, Dell is well known for its innovations in supply chain management and electronic commerce, particularly its direct-sales model and its "build-to-order" or "configure to order" approach to manufacturing—delivering individual PCs configured to customer specifications. (Bloomberg,2003)

Below is the comparison of performance analysis of Dell and HP based on different types of Ratio Analysis:

Current Ratio and Acid Test Ratio:
The average current ratio and acid test ratio of Dell was 1.19 and 1.14 respectively whereas HP’s current ratio acid test ratio was 1.17and 1.00. This means Dell has more current assets to cover its short term liabilities and compared to HP, Dell is a safer and more financially strong company.

Collection period
For the collection of its account receivable, Dell and HP took 32.04 days and 49.74 days in average respectively which means that Dell is stronger and more successful to collect its debt. This enables Dell to reduce the liability for risky account receivable. The shorter period for collection also enables Dell to pay for its inventory and not have to expose them to greater amounts of short term debt through…

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