Financial Analysis
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Exhibits 2 and 5 contain the comparative balance sheet and income statement for Dell Computer Corporation. Assume you are the chief financial officer.
1. Compute liquidity ratios (working capital and current ratio) and profitability ratios (profit margin, asset turnover, return on assets, debt to equity ratio, and return on equity) for 2001 and 2002 and show the industry ratios (except working capital) from Figures 4 to 9 in this chapter. Use income from continuing operations and end-of-year assets and stockholders' equity to compute the ratios.
2. Write a memorandum to the board of directors in executive summary form describing changes in Dell's liquidity and profitability performance from 2001 to 2002 compared with the industry averages.
(See attached file for full problem description)
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Please find my response in the attached file.
PS. There should also be the information for Dell's balance sheet in the year 2001 too. However, I tried to search the information from their website in the internet at the following link.
http://www1.ap.dell.com/content/topics/global.aspx/corp/investor/en/annual?c=th&l=en&s=corp
Exhibits 2 and 5 contain the comparative balance sheet and income statement for Dell Computer Corporation. Assume you are the chief financial officer.
1. Compute liquidity ratios (working capital and current ratio) and profitability ratios (profit margin, asset turnover, return on assets, debt to equity ratio, and return on equity) for 2001 and 2002 and show the industry ratios (except working capital) from Figures 4 to 9 in this chapter. Use income from continuing operations and end-of-year assets and stockholders' equity to compute the ratios.
2. Write a memorandum to the board of directors in executive summary form describing changes in Dell's liquidity and profitability performance from 2001 to 2002 compared with the industry averages.
For the year 2001
1) Compute the following liquidity measures: (a) working capital and (b) current ratio.
working capital is current assets minus current liabilities
working capital = 7,877 - 7,519 = 358
current ratio
current ratio = current assets/current liabilities
= 7,877/7,519
= 1.05
2) Compute the following profitability ...
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