Inventory analysis

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 ex., Dell will build and deliver a computer within four days of a customer entering an order on a Web pg. Hewlett-Packard, on the other hand, builds some computers prior to receiviing an order, then sells from this inventory once an order is received. Below is selected financial information for both companies from a recent year's financial statements (in millions):

Dell Inc. Hewlett-Packard Co.

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Sales $61,494 $126,035

Cost of goods sold 50,098 96,089

Inventory, beginning of period 1,051 6,128

Inventory, end of period 1,301 6,466

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.

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