Dell Inc. and Hewlett-Packard Company (HP) compete with eachother in the persona
ID: 2457693 • Letter: D
Question
Dell Inc. and Hewlett-Packard Company (HP) compete with eachother in the personal computer market. Dell’s strategyis to assemble computers to customer orders, rather than forinventory. Thud, for example, Dell will build and deliver acomputer within four days of a customer entering an order on a webpage. Hewlett-Packard, on the other hand, builds somecomputers prior to receiving an order, then sells from thisinventory once an order is received. Below is selectedfinancial information for both companies from a recent year’sfinancial statements (in millions):
DellInc. Hewlet-Packard
Company
Sales 55,908 86,696
Cost of goodssold 45,620 66,440
Inventory, beginning ofperiod 459 7,071
Inventory, end ofperiod 576 6,877
(Note: (a) Dell inventory turnover, 88.2)
Explanation / Answer
Dell Inc. Inventory Turnover = Cost of goods sold Average inventory Average inventory = 459 + 576 =517.5 2 Inventory Turnover = 45,620 517.5 = 88.2 Days' sales = 365 / Inventory turnover = 365 / 88.2 = 4.1 days Hewlett-Packard Average Inventory = 7,071 +6,877 2 = 6,974 Inventory Turnover = 66,440 6,974 = 9.5 Days' sales = 365 / 9.5 = 38.4 days. 2. Comparing Dell and HP, Inventory Turnover is 88.2 in Dell whereas 9.5 in Hp , Dell on anaverage sold 88.2 times its inventory in the current year and HPsold only 9.5 times per year. Comparing the days sales , Dell's is 4.1 days and HP's is 38.4days, average number of days to sell the inventory in Dell's caseis only 4.1 day whereas in HP's is 38.4 days. Dell is better than HP in operating strategies and policies.
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