Using Financial Reports: Analyzing the Balance Sheet

Recent balance sheets of Dell, Inc., a leading producer and marketer of a broad range of personal computers, mobility products, software, and related tools and services, are provided.

Required:

1. Is Dell a corporation, sole proprietorship, or partnership? Explain the basis of your answer.

2. Use the company's balance sheet (consolidated statement of financial position) to determine the amounts in the accounting equation (A = L + SE) at the end of the most recent year.

3. Calculate the company's current ratio on January 30, 2009. Interpret the ratio that you calculated. What other information would make your interpretation more useful?

4. Give the journal entry the company will make in 2009 when it pays its fiscal year 2008 accounts payable (fiscal year 2008 ends on January 30, 2009).

5. Does the company appear to have been profitable over its years in business? On what account are you basing your answer? Assuming no dividends were paid, how much was net income (or net loss) in the most recent year? If it is impossible to determine without an income statement, stateso.

DELL INC. Consolidated Statements of Financial Position (dollars in millions) January 30, 2009 February 1, 2008 ASSETS Current assets $ 8,352 $ 7,764 Cash and cash equivalents Short-term investments 740 208 6,443 Accounts receivable 7,693 1,180 3,035 Inventories 867 Other 3,749 20,151 2,277 Total current assets 19,880 Property, plant and equipment, net Investments Intangibles 2,668 454 1,560 2,428 1,025 2,461 1,157 Other noncurrent assets $ 26.500 $ 27,561 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 2$ Short-term debt 113 8,309 225 Accounts payable Accrued and other liabilities 11.492 3,788 4,323 Deferred service revenue 2,649 2,486 Total current liabilities 14,859 18,526 Long-term debt Long-term defered service revenue 1,898 362 3,000 2,774 Other noncurrent liabilities 2,472 2,070 22,229 Total liabilities 23,732 Stockholders' equity Contributed capital Retained earnings Other 10,589 11,189 18,199 (24,959) 20,677 (27,595) Total stockholders' equity 4,271 3,829 $ 26,500 $ 27,561