Refer to the financial statements of Dell Inc. reproduced in Appendix A.

Required:

a. Compute the following return on invested capital ratios of Dell for 2005:

(1) Return on net operating assets (RNOA).

(2) Disaggregated return on net operating assets.

(3) Return on common equity.

(4) Disaggregated return on common equity.

b. Compute the following asset turnover ratios of Dell for 2005.

(1) Accounts receivable turnover and average collection period.

(2) Inventory turnover and average inventory days outstanding.

(3) Long-term operating asset turnover.

(4) Accounts payable turnover and average payable days outstanding.

c. Using your computations in parts (a) and (b), analyze and evaluate Dell’s return on invested capital and turnover ratios for 2005.

Financial Statement of Dell Inc.:

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(dollars in millions) Net revenue. Gross margin % of net revenue. % of Income before income taxes Income tax provision. % of Income before income taxes. Operating expenses. % of net revenue. Operating income... % of net revenue. 8.6% Tax provision before repatriation charge...... $ 1,122 % of income before income taxes.. 25.2% Tax repatriation charge..... Net income... % of net revenue.. January 28, Percentage 2005 Change $49,205 $ 9,015 18.3% $ 4,761 9.7% $ 4,254 $ 280 6.3% $ 1,402 31.5% $ 3,043 6.2% 19% 19% 19% 20% FISCAL YEAR ENDED 15% January 30, Percentage January 31, 2004 Change 2003 $41,444 $ 7,552 18.2% $4,008 9.7% $ 3,544 8.6% $ 1,079 29.0% $ 1,079 29.0% $ 2,645 6.4% 17% 19% 14% 25% 25% $35,404 $ 6,349 17.9% $ 3,505 9.9% $ 2,844 8.0% $905 29.9% $ 905 29.9% $2,122 6.0%