Dell Computer Corporation (DELL) has long been recognized for its innovative approach to managing its working capital. Describe how Dell pioneered the management of net working capital to free up resources in the firm.

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Answer 1

Textbook Question

Chapter 15, Problem 1RQ

Dell Computer Corporation (DELL) has long been recognized for its innovative approach to managing its working capital. Describe how Dell pioneered the management of net working capital to free up resources in the firm.

Expert Solution & Answer

Summary Introduction

To discuss: The ways Company D pioneered the management of net working capital to free up the resources in an organization.

Explanation of Solution

Company D pioneered the build-to-order model in the computer hardware industry. PCs would not be manufactured in advance and stored in warehouses. Instead a PC would be installed only after a customer has placed an order. This led to a very low inventory, which reduced the cost of carrying.

Carrying cost of raw materials was also reduced due to very low inventory of raw materials.

Obsolesce of raw materials has also been minimized and the loss of older raw materials has been kept to a minimum with the advent of new technology.

Days sales inventory (DSI) was low, and Days receivables was very low because the PC would only be installed after the customer paid for it.

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Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes): Income Statement Balance Sheet Sales Costs $ 40,000 Assets 34,160 $26,000 Debt Equity $ 7,000 19,000 Net income $ 5,840 Total $26,000 Total $26,000 The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) Pro forma income statement Sales Costs $ 48000 40992 Assets $ 31200 Pro forma balance sheet Debt 7000 Equity 19000 Net income $ 7008 Total $ 31200 Total 30304 What is the external financing needed? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.) External financing needed $ 896

Answer 2

Textbook Question

Chapter 15, Problem 1RQ

Dell Computer Corporation (DELL) has long been recognized for its innovative approach to managing its working capital. Describe how Dell pioneered the management of net working capital to free up resources in the firm.

Expert Solution & Answer

Summary Introduction

To discuss: The ways Company D pioneered the management of net working capital to free up the resources in an organization.

Explanation of Solution

Company D pioneered the build-to-order model in the computer hardware industry. PCs would not be manufactured in advance and stored in warehouses. Instead a PC would be installed only after a customer has placed an order. This led to a very low inventory, which reduced the cost of carrying.

Carrying cost of raw materials was also reduced due to very low inventory of raw materials.

Obsolesce of raw materials has also been minimized and the loss of older raw materials has been kept to a minimum with the advent of new technology.

Days sales inventory (DSI) was low, and Days receivables was very low because the PC would only be installed after the customer paid for it.

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Answer 3

Textbook Question

Chapter 15, Problem 1RQ

Dell Computer Corporation (DELL) has long been recognized for its innovative approach to managing its working capital. Describe how Dell pioneered the management of net working capital to free up resources in the firm.

Expert Solution & Answer

Summary Introduction

To discuss: The ways Company D pioneered the management of net working capital to free up the resources in an organization.

Explanation of Solution

Company D pioneered the build-to-order model in the computer hardware industry. PCs would not be manufactured in advance and stored in warehouses. Instead a PC would be installed only after a customer has placed an order. This led to a very low inventory, which reduced the cost of carrying.

Carrying cost of raw materials was also reduced due to very low inventory of raw materials.

Obsolesce of raw materials has also been minimized and the loss of older raw materials has been kept to a minimum with the advent of new technology.

Days sales inventory (DSI) was low, and Days receivables was very low because the PC would only be installed after the customer paid for it.

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Answer 4

Textbook Question

Chapter 15, Problem 1RQ

Dell Computer Corporation (DELL) has long been recognized for its innovative approach to managing its working capital. Describe how Dell pioneered the management of net working capital to free up resources in the firm.

Expert Solution & Answer

Summary Introduction

To discuss: The ways Company D pioneered the management of net working capital to free up the resources in an organization.

Explanation of Solution

Company D pioneered the build-to-order model in the computer hardware industry. PCs would not be manufactured in advance and stored in warehouses. Instead a PC would be installed only after a customer has placed an order. This led to a very low inventory, which reduced the cost of carrying.

Carrying cost of raw materials was also reduced due to very low inventory of raw materials.

Obsolesce of raw materials has also been minimized and the loss of older raw materials has been kept to a minimum with the advent of new technology.

Days sales inventory (DSI) was low, and Days receivables was very low because the PC would only be installed after the customer paid for it.

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Answer 5

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Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

Summary Introduction

To discuss: The ways Company D pioneered the management of net working capital to free up the resources in an organization.

Explanation of Solution

Company D pioneered the build-to-order model in the computer hardware industry. PCs would not be manufactured in advance and stored in warehouses. Instead a PC would be installed only after a customer has placed an order. This led to a very low inventory, which reduced the cost of carrying.

Carrying cost of raw materials was also reduced due to very low inventory of raw materials.

Obsolesce of raw materials has also been minimized and the loss of older raw materials has been kept to a minimum with the advent of new technology.

Days sales inventory (DSI) was low, and Days receivables was very low because the PC would only be installed after the customer paid for it.

Answer 8

Expert Solution & Answer

Summary Introduction

To discuss: The ways Company D pioneered the management of net working capital to free up the resources in an organization.

Explanation of Solution

Company D pioneered the build-to-order model in the computer hardware industry. PCs would not be manufactured in advance and stored in warehouses. Instead a PC would be installed only after a customer has placed an order. This led to a very low inventory, which reduced the cost of carrying.

Carrying cost of raw materials was also reduced due to very low inventory of raw materials.

Obsolesce of raw materials has also been minimized and the loss of older raw materials has been kept to a minimum with the advent of new technology.

Days sales inventory (DSI) was low, and Days receivables was very low because the PC would only be installed after the customer paid for it.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Summary Introduction

To discuss: The ways Company D pioneered the management of net working capital to free up the resources in an organization.

Answer 12

Explanation of Solution

Company D pioneered the build-to-order model in the computer hardware industry. PCs would not be manufactured in advance and stored in warehouses. Instead a PC would be installed only after a customer has placed an order. This led to a very low inventory, which reduced the cost of carrying.

Carrying cost of raw materials was also reduced due to very low inventory of raw materials.

Obsolesce of raw materials has also been minimized and the loss of older raw materials has been kept to a minimum with the advent of new technology.

Days sales inventory (DSI) was low, and Days receivables was very low because the PC would only be installed after the customer paid for it.

Answer 13

Ch. 15 - Dell Computer Corporation (DELL) has long been...Ch. 15 - Prob. 2RQ Ch. 15 - Prob. 3RQ Ch. 15 - Prob. 4RQ Ch. 15 - Explain what is meant by the statement The use of...Ch. 15 - Prob. 6RQ Ch. 15 - Prob. 7RQ Ch. 15 - How can the formula interest = principle rate ...Ch. 15 - How can we accommodate the effects of compounding...Ch. 15 - Prob. 10RQ

Dell Computer Corporation (DELL) has long been recognized for its innovative approach to managing its working capital. Describe how Dell pioneered the management of net working capital to free up resources in the firm.

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