Dell's Working Capital

In this case, we will learn about the benefits of effective working capital management by analyzing Dell's financial statements, inventory management, and competitive position,.

Those presenting the case should consider how you would respond to the following questions. For the majority of the class who are not assigned to formally write up and present the case, you may wish to jot down some issues after reading the case briefing that you think are important, and then be prepared to respond to the presenters with questions and comments.

For the group assigned to present the case, you should write up responses to each of the following questions. You can go beyond the questions if you think there are other important issues that support your solution. You can split the assignment up among the members or have each make up their own responses and then combine them in a final write-up. Typically the second approach works best because each member gives their own assessment of each issue and then the best responses can be used in the final write-up. But when specific individuals in the group have more specialized skills to answer particular questions, or do the write-up, or make the presentation, then splitting up the work could work best. It is up to your group to decide. Your group will be graded based upon the final write-up, presentation, and responses to the audience questions. Presentation can be purely verbal or include PowerPoint slides, whichever works best for your group.

QUESTIONS

1. Briefly, what is going on in the case? 2. Explain how Dell's working capital management was a competitive advantage by comparing its results to those of its competitors. 3. Describe how Dell funded its 52 percent growth in 1996. 4. Assume that Dells sales will grow at 50% in 1997. How might the company fund the growth internally? For example, how much would working capital need to be reduced and/or profit margin increased? What steps do you think that the company should take? 5. Redo part 4 but assume that Dell buys back $500 million of stock and repaid its 1996 long-term debt. You can make reasonable assumptions such as that certain liabilities will remain at the same percent of sales in 1997 as they were in 1996.