1. Prepare vertical (common size) statements for the balance sheets (4 years) and income statements (5 years) in the tabs below. Use Excel formulas to make your calculations and round your answer cells to 3 decimal places. Use total assets on the balance sheet and net revenue on the income statement for each year as the denominator of your calculations. 2. After completing your calculations in #1, compare the years and note any unusual changes that occurred over the periods. Very small changes are not likely unusual, but even small changes every year can indicate a trend. After analyzing each line item on the two statements, write a memo listing any items you think need further investigation and discuss possible errors or manipulations that might be occurring. List any related accounts that might need investigation. Use the MEMO tab to write your analysis. DELL INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions) DELL INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions) January 31, 2003 February 1, 2002 January 28, 2005 January 30, 2004 ASSETS ASSETS Current assets: S 4,232 $ 3,641 Cash and cash equivalents $ 4,747 $ 4,317 Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net 406 273 Short-term investments 5,060 835 2,586 2,269 Accounts receivable, net 4,414 3,635 Inventories 306 278 Inventories 459 327 Other 1,394 1,416 Other 2,217 1,519 Total current assets 8,924 7,877 Total current assets 16,897 10,633 Total current assets 8,924 7,877 Total current assets 16,897 10,633 Property, plant and equipment, net 913 826 Property, plant, and equipment, net 1,691 1,517 Investments 5,267 4,373 Investments 4,319 6,770 Other non-current assets 366 459 Other non-current assets 308 391 Total assets $ 15,470 $ 13,535 Total assets $ 23,215 $ 19,311 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued and other $ $ $ Current liabilities: Accounts payable Accrued and other 5,989 2,944 $ 5,075 2,444 8,895 5,241 7,316 3,580 Total current liabilities 8,933 7,519 Total current liabilities 14,136 10,896 Total liabilities 10,597 8,841 Total liabilities 16,730 13,031 Stockholders' equity: Preferred stock and capital in excess of $.01 par value; shares issued and outstanding: Common stock and capital in excess of $.01 par value; shares authorized: 7,000; shares issued: 2,681 and 2,654, respectively Treasury stock, at cost; 102 and 52 shares, respectively Retained earnings Utner comprenensive Stockholders' equity: Prererrea stock ana capital in excess of .01 par value; shares issued and outstanding: none Common stock and capital in excess of $.01 par value; shares authorized: 7,000; shares issued: 2,769 and 2,721, respectively 6,018 5,605 8,195 6,823 (2,249 ) 1,364 (4,539) 3,486 (33) (59) Treasury stock, at cost; 284 and 165 shares, respectively (10,758) Retained earnings 9,174 Other comprehensive loss (82) Other (44) (6,539) 6,131 (83) (52) 38 Other (64) Total stockholders' equity 4,873 4,694 Total stockholders' equity 6,485 6,280 Total stockholders' equity 4,873 4,694 Total stockholders' equity 6,485 6,280 Total liabilities and stockholders' equity Total liabilities and stockholders' equity $ 15,470 $ 13,535 $ 23,215 $ 19,311 DELL INC. CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) Fiscal Year Ended Fiscal Year Ended January 31. 2003 February 1. 2002 February 2. 2001 January 28, 2005 January 30. 2004 Net revenue $ $ $ $ 35,404 29,055 31,168 25.661 31,888 25.445 Net revenue Cost of revenue 49,205 40,190 41.444 33,892 Cost of revenue Gross margin 6,349 5,507 6,443 Gross margin 9,015 7,552 3,050 2,784 3,193 4,298 3,544 Operating expenses: Selling, general and administrative Research development and engineering Special charges Total operatin g expense Operating expenses: Selling general, and administrative Research development, and engineering 455 463 464 452 482 482 105 Total operatin 9 expense 3,505 3,718 3,780 4,761 4,008 2,844 1,789 2,663 4,254 3,544 Operatin gincome Investment and other income (loss), net Operatin gincome Investment and other income, net 183 (58) 531 191 180 Provision for income taxes 905 485 958 Income tax provision 1,402 1,079 2.122 1,246 2.236 Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting principle, net 59 Net income $ 2,122 $ 1,246 $ 2,177 Net income 3,043 2,645 Earnings per common share: Before cumulative effect of change in accounting principle: Basic $ 0.82 $ 0.48 $ 0.87 Diluted 0.8 0.46 0.81 Earnings per common share: After cumulative effect of change in accounting principle: Basic $ 0.82 $ 0.48 0.84 Basic $ 1.21 1.03 Diluted $ 0.8 0.46 0.79 Diluted $ 1.18 $ 1.01 Weighted average shares outstanding: Weighted average shares outstanding Basic Basic 2,584 2,644 2,602 2,726 Diluted 2,582 2,746 Diluted 2,509 2,568 2,565 2,619 The accompanying notes are an integral part of these consolidated financial statements. 1. Prepare vertical (common size) statements for the balance sheets (4 years) and income statements (5 years) in the tabs below. Use Excel formulas to make your calculations and round your answer cells to 3 decimal places. Use total assets on the balance sheet and net revenue on the income statement for each year as the denominator of your calculations. 2. After completing your calculations in #1, compare the years and note any unusual changes that occurred over the periods. Very small changes are not likely unusual, but even small changes every year can indicate a trend. After analyzing each line item on the two statements, write a memo listing any items you think need further investigation and discuss possible errors or manipulations that might be occurring. List any related accounts that might need investigation. Use the MEMO tab to write your analysis. DELL INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions) DELL INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions) January 31, 2003 February 1, 2002 January 28, 2005 January 30, 2004 ASSETS ASSETS Current assets: S 4,232 $ 3,641 Cash and cash equivalents $ 4,747 $ 4,317 Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net 406 273 Short-term investments 5,060 835 2,586 2,269 Accounts receivable, net 4,414 3,635 Inventories 306 278 Inventories 459 327 Other 1,394 1,416 Other 2,217 1,519 Total current assets 8,924 7,877 Total current assets 16,897 10,633 Total current assets 8,924 7,877 Total current assets 16,897 10,633 Property, plant and equipment, net 913 826 Property, plant, and equipment, net 1,691 1,517 Investments 5,267 4,373 Investments 4,319 6,770 Other non-current assets 366 459 Other non-current assets 308 391 Total assets $ 15,470 $ 13,535 Total assets $ 23,215 $ 19,311 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued and other $ $ $ Current liabilities: Accounts payable Accrued and other 5,989 2,944 $ 5,075 2,444 8,895 5,241 7,316 3,580 Total current liabilities 8,933 7,519 Total current liabilities 14,136 10,896 Total liabilities 10,597 8,841 Total liabilities 16,730 13,031 Stockholders' equity: Preferred stock and capital in excess of $.01 par value; shares issued and outstanding: Common stock and capital in excess of $.01 par value; shares authorized: 7,000; shares issued: 2,681 and 2,654, respectively Treasury stock, at cost; 102 and 52 shares, respectively Retained earnings Utner comprenensive Stockholders' equity: Prererrea stock ana capital in excess of .01 par value; shares issued and outstanding: none Common stock and capital in excess of $.01 par value; shares authorized: 7,000; shares issued: 2,769 and 2,721, respectively 6,018 5,605 8,195 6,823 (2,249 ) 1,364 (4,539) 3,486 (33) (59) Treasury stock, at cost; 284 and 165 shares, respectively (10,758) Retained earnings 9,174 Other comprehensive loss (82) Other (44) (6,539) 6,131 (83) (52) 38 Other (64) Total stockholders' equity 4,873 4,694 Total stockholders' equity 6,485 6,280 Total stockholders' equity 4,873 4,694 Total stockholders' equity 6,485 6,280 Total liabilities and stockholders' equity Total liabilities and stockholders' equity $ 15,470 $ 13,535 $ 23,215 $ 19,311 DELL INC. CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) Fiscal Year Ended Fiscal Year Ended January 31. 2003 February 1. 2002 February 2. 2001 January 28, 2005 January 30. 2004 Net revenue $ $ $ $ 35,404 29,055 31,168 25.661 31,888 25.445 Net revenue Cost of revenue 49,205 40,190 41.444 33,892 Cost of revenue Gross margin 6,349 5,507 6,443 Gross margin 9,015 7,552 3,050 2,784 3,193 4,298 3,544 Operating expenses: Selling, general and administrative Research development and engineering Special charges Total operatin g expense Operating expenses: Selling general, and administrative Research development, and engineering 455 463 464 452 482 482 105 Total operatin 9 expense 3,505 3,718 3,780 4,761 4,008 2,844 1,789 2,663 4,254 3,544 Operatin gincome Investment and other income (loss), net Operatin gincome Investment and other income, net 183 (58) 531 191 180 Provision for income taxes 905 485 958 Income tax provision 1,402 1,079 2.122 1,246 2.236 Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting principle, net 59 Net income $ 2,122 $ 1,246 $ 2,177 Net income 3,043 2,645 Earnings per common share: Before cumulative effect of change in accounting principle: Basic $ 0.82 $ 0.48 $ 0.87 Diluted 0.8 0.46 0.81 Earnings per common share: After cumulative effect of change in accounting principle: Basic $ 0.82 $ 0.48 0.84 Basic $ 1.21 1.03 Diluted $ 0.8 0.46 0.79 Diluted $ 1.18 $ 1.01 Weighted average shares outstanding: Weighted average shares outstanding Basic Basic 2,584 2,644 2,602 2,726 Diluted 2,582 2,746 Diluted 2,509 2,568 2,565 2,619 The accompanying notes are an integral part of these consolidated financial statements