Question

	Dell	Dell	HP (Competitor)	HP (Competitor)
	2018	2017	2017	2016
Working Capital	-6,935,000,000	-7,362,000,000	-94,000,000	-340,000,000
Current Ratio	0.849	.810	1.00	.98
Current Cash Debt Coverage Ratio	.162	.070	.178	.106
A/R Turnover	5.69	5.93	8.59	3.87
Inventory Turnover	22.47	23.42	8.27	7.15

1. Does liquidity seem appropriate for Dell or do you foresee any liquidity problems or inefficiencies?

2. Discuss accounts receivable turnover and inventory turnover compared to the past year and to the competitor (HP). Does Dell's management of receivables and inventory appear consistent with their business strategy?

3. If Dell were faced with a liquidity crisis, what would their options be (for example, many companies have lines of credit that are funds a lender has committed to lend if needed.)

Answer 1

1. Liquidity does not seem appropriate for Dell as represented by the negative working capital indicating that the current liabilities are more than the current assets. The current ratio is also less than 1 which is a negative sign in terms of liquidity.

2. Compared to the past year, there is not much of a difference in the accounts receivable turnover ratio. However, compared to competitor Dell the ratio is lower indicating that HP has improved its credit collection. Its inventory turnover ratio is in a much healthier position than competitor HP.

3. If Dell were faced with a liquidity crisis, the most appropriate option would be availment of cash credit or a short term of loan.