Group Case: Dell's Working Capital Fundamentals of Managerial Finance 1) How was Dell's working capital policy a competitive advantage? Dell Computer Corporation in the mid-90s was using a just in time order fulfillment system and accurate forecasting to reduce its inventories to the lowest possible levels in the highly competitive PC market where profit margins are very small. This working capital policy allowed Dell to achieve higher levels of liquidity and inventory turnover than its competitors. As a result Dell was able to have a quicker response than its competitors every time the computer industry released new microprocessors and operating systems which proved to be key in obtaining a privileged competitive advantage over major PC manufacturers of the time, such as Apple, IBM, and Compaq. 2) How did Dell fund its 54% growth in 1996?
This means that Costco is doing a very efficient job in using its assets in creating sales. Costco’s equity multiplier has ranged from 1.88 to 2.27 from 1999 to 2008. The average equity multiplier in this time period was 2.06 compared to the industry average of2.34. Costco is slightly lower than the industry average. To increase their financial performance the company should increase their financial leverage and rely on more debt to finance their assets.
Option two is the choice because the $2,716 savings difference in total interest from option two outweighs the $1,043 in interest savings from option one. Here the simulator reveals that loan option one is the correct choice. Loan option one is the best choice to solve the working capital shortfall because even though it has a higher interest rate, there is no prepayment limitation and has a total interest payment of only $32,603 after three months. The Financial Dictionary explains that “prepayment is good for the borrower because it relieves him/her of the debt, but it deprives the lender of interest he/she would have received otherwise” (Financial Dictionary, p. 1,
Situational Analysis (5Cs) Company Established in 1999, Webvan aspired to provide better service than was available at modern supermarkets through a same-day delivery system; within a customer selected 3-minute window. To encourage adoption, Webvan did not charge membership fees and waived delivery charges for orders over $50. Webvan’s two main strategic assets are its sophisticated warehouse technology and efficient delivery system. A high degree of automation at the warehouse minimizes human labor and, therefore, reduces inventory-holding costs. A two-level hub-and-spoke delivery concept reduces delivery times, and thus allows for more precise delivery scheduling and shorter delivery windows.
A1a. The decision analysis tool to Buy New Equipment is the best fit for the organization. Buying New Equipment provides the lowest cost based on volume for producing the Samba Sneaker. According to the graph, Buying New Equipment would be more cost-effective for the organization based on volumes of output with a lower cost for the organization when compared to Reconditioning existing equipment or Outsourcing. Therefore, Buying New Equipment with fixed cost of $200,000 variable cost of $500 for every 1,000 sneaker is more cost-effective for the organization.
Should Mr. Jones convert Smithon to an S corporation and change the fiscal year end to a calendar year end? A: Converting Smithon to an S corporation has merit if the goal is for Smithon to remain controlled by a small number of shareholders. However, the equipment deductions for the corporation may be more valuable than it would be to Johnson personally. Either way, Smithon's value to Johnson will be the same, if he purchases Smithon outright. Changing to a calendar year end has little useful effect, and it requires that Smithon produce a short-year tax return from Dec to Jan, which is a relatively unnecessary administrative expense.
In other words, the return on equity ratio shows how much profit each dollar of common stockholders' equity generates. Based on Nike, Inc.’s ROA of 14.4%, it can be determined that Nike, Inc. is may be more efficient in managing the utilization of its asset base versus Under Armour, whose ROA is 11.1%. The higher the ratio the better profit gain the company produces. Financial Leverage Percentage | 2012 | Under Armour | 4.7% | Nike, Inc. | 7% | The financial leverage percentage measures the advantage or disadvantage that occurs when a company’s return on equity differs from its return on assets. Under Armour’s financial leverage ratio (4.7%) is lower because it utilizes less debt in its capital structure and it is not earning as high on its assets, compared to Nike, Inc. (7%).
Cost savings can be computerized accounting programs reduce staff time doing accounts and reduce audit expenses as records are neat, up-to-date and accurate. This system allows them to record business transactions accurately and generate financial reports quickly for management review. However if Rumble carry less transactions this means they won’t need to have computerised accounting system because it is very expensive for them to use. In this case it is best for them to have manual accounting system because it is reliable, cheap and easy to use. They can easily do their transaction without problems.
This action will help the company down the road as fewer liabilities will result in less cash outflow, and place the company in a position to manage through the construction downturn. Another upside in the balance sheet was that The Home Depot has reported a $63 million dollar increase in stock holder´s equity. This information will be used by potential lenders or investors to determine if this company is worth the investment. In this case, it appears that The Home Depot would be a good credit risk, based on the latest
Apex brings in annual sales of $60 million, but with only enough funding to choose one investment, the products also have to be evaluated by lifecycle category to understand the investment. Compound A-115 has benefits in that it is new in its lifecycle, new to the market and the opportunity exists to use this to the full advantage in the business community. There is only one competitor in the field, and although they have brand recognition and a strong customer service ranking, there is opportunity to exploit this life cycle process. Additionally, Apex could revisit their customer service strategy to make it comparable. Apex would have an opportunity to do some innovation, branding and marketing to challenge the competitor and offer an alternative.