FINANCIAL MANAGEMENT

Dr. Subiakto Soekarno MBA, RFA, QWP, CFP

OGRADY APPAREL COMPANY

Syndicate 8
RM Dimas Radithya Pratomo - 29114364
Hafidz Syahrial - 29114365
Sonia Kasella - 29114396
Ridono Caesar Suhud - 29114456

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT
INSTITUT TEKNOLOGI BANDUNG
2015

1. OBJECTIVE
Dell was first in the industry to deliver customized products
within a few days. While competitors were maintaining high levels of
inventory to stock resellers and stock channels, Dell focused on
customer customization of products and supply to them when they
wanted it, thereby saving on huge inventory cost. (Build to order
Model).
Since the component cost was reducing due to technological
advancements, Dell was able to utilize it to pass on the savings to
customers by providing comparative products at cheaper prices. This
means Dells products is easy to upgrade with a new parts and
component.
Dell have a strong competition with their competitors. Because of
that, Dell want to increase their growth to 52% in 1996. The problem
is, How did Dell fund its 52% growth in 1996?
2. ANALYSIS
How did Dell fund its 52% growth in 1996?
Current Assets
Current Liabilities
Net Working Capital
Current Ratio
Quick Ratio
Avg CCC
OLA
NOC
Net Investment in OC
NOPAT
FCF
Net Income
Shareholders equity
ROE
Sales
Cost of Sales
Inventory

1996
1957
939
1018
2.08
1.46
41.25
179
450
211
268.1
57.1
272
973
0.28
5296
4229
429

1995
1470
752
718
1.95
38.5
117
239
56
149.1
93.1
149
652
0.23
3475
2737
293

Inventory Turnover
Receivables

9.86
9.08

9.34
6.49

Turnover
Payables Turnover
Net WC Turnover
OCA
OCL
NOWC

9.06
5.2
1210
939
271

6.79
4.84
874
752
122

The increase in sales from 1995 to 1996 = 5296-3475 = USD

1821million.
The increase in current assets excluding short term investment

from 1995 to 1996 = (1957-591)-(1470-484) = USD 380million.

The increase in current liabilities from 1995 to 1996 = 939 752

= USD 186 million.

The increase in short term investments from 1995 to 1996 =
591-484 = USD 107 million.

(1995)

Asset turnover ratio = Sales*100/ Total Assets = 3475*100/1594

= 2.18

Short-term

investments

as

percentage

of

sales

Short

investments*100/Sales
= 484*100/3475 = 14%

Current

Liabilities

as

percentage

752*100/3475 = 21.6%

(1996)

Asset turnover ratio = 5296*100/2148 = 2.46

of

sales

Short-term

investments

as

percentage

of

sales

Short

investments*100/Sales
= 591*100/5296 = 11%

Current

Liabilities

as

percentage

of

sales

939*100/5296 = 17.7%

It can be seen that the asset turnover ratio has increased from
2.18 to 2.46. This means the efficiency of the firm has increased.

The current liabilities as a percentage of sales have decreased

from 21.6% to 17.7%. Therefore, the liabilities have reduced.

Dell funded its 52% growth in sales mainly by increasing its asset
efficiency, reducing its current liabilities and decreasing its short
term investments in comparison to the earlier year.

3. CONCLUSION
According to the important ratios, we assume that Dell have a good
CCC and good turnover ratios but Payables turnover ratio has
increased which shows that the company has started paying off to its
creditor faster. Dell could reduce it CCC by differing the payment to
suppliers to some extent. Even FCF is declining, it is not necessarily a
bad thing if the Dell Company is re-investing all of their cash in
business expansion. After all, we assumed that Dell have a good
potential of funding the growth internally since it carries good amount
of investments too which can be liquidated if needed.