Inventory analysis OBJ. 2 Dell Inc. and Hewlett-Packard Company (HP) compete with each other in the personal computer market. Dell’s primary strategy is to assemble computers to customer orders, rather than for inventory. Thus, for example, Dell will build and deliver a computer within four days of a customer entering an order on a Web page. Hewlett-Packard, on the other hand, builds some computers prior to receiving an order, then sells from this inventory once an order is received. Selected financial information for both companies from a recent year’s financial statements follows (in millions):

Dell Inc.

Hewlett-Packard Company Sales $56,940 $120,357 Cost of goods sold 44,754 92,385 Inventory, beginning of period 1,382 6,317 Inventory, end of period 1,404 7,490

a. Determine for both companies (1) the inventory turnover and (2) the number of days’
sales in inventory. Round to one decimal place.

b. Interpret the inventory ratios by considering Dell’s and Hewlett-Packard’s operating strategies.