Assigment 1 Dell’s working Capital
Student number Name Class
0804809 Shu Pei Sun BE37
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Question 1:
Kennis Inzicht Toepassen x x 5 punten
Calculate the level of working capital for Dell for the years 1994, 1995 and 1996. (Please show the full calculation and formula’s used)
The total current assets in 1996 are: $ 1.957.000
The total current assets in 1995 are: $ 1.470.000
The total current assets in 1994 are: $ 1.048.000
The total current liabilities in 1996 are: $ 939.000
The total current liabilities in 1995 are: $ 752.000
The total current liabilities in 1994 are: $ 538.000
Work
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Because Dell waited until they received the order from the customer to start building the computer, Dell kept the CCC (cash conversion cycle to a minimum). If Dell were to operate at Compaq’s DSI level, we estimate that Dell would have to increase its 1995 inventory from $293m to $668m, which is an increase of $375 million. This would mean that Dell would have needed to invest in $668 million in inventory. I believe that the main reason that Dell was able to maintain such a low level of inventory compared to their competition has a direct result of their competitive strategy to maintain a minimum level of inventory.
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worldwide to serve the customers and is famous for the variety of products that it provides in the
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