Question

Dell Inc. and Hewlett-Packard Development Company, L.P. (HP) are both manufacturers of computer equipment and peripherals. However, the two companies follow two different strategies. Dell follows a build-to-order strategy, where the consumer orders the computer from a Web page. The order is then manufactured and shipped to the customer within days of the order. In contrast, HP follows a build-to-stock strategy, where the computer is first built for inventory, then sold from inventory to retailers, such as Best Buy. The two strategies can be seen in the difference between the inventory turnover and number of days' sales in inventory ratios for the two companies. The following financial statement information is provided for Dell and HP for a recent fiscal year (in millions):


a. Determine the inventory turnover ratio and number of days' sales in inventory ratio for each company. Round to one decimal place.
b. Interpret the difference between the ratios for the twocompanies.


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  • CreatedJuly 17, 2012
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