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Dell Cash Flow Analysis

Dell Cash flow analysis Cash flow statement show how money is moving into company and out of it. In addition to this, if we want to determine Dell company solvency, we have to take a look in cash inflows and outflows. So in order to analise Dell, I have done calcualtions of these ratios: Cash Ratio=(Cash&Equivalents+ Short term investment)/Current Liabilities| 2007| 10298/17791= 0,579| 2008| 7972/18529 = 0,43| 2009| 9092/14859 = 0,612| 2010| 11008/18960 = 0,58| 1. Liquidity ratio (www. moneycentral. msn. com) Cash ratio helps to determine how quickly Dell can pay back its short term debts.

From data given above, it is observable that in 2009 Dell has the best liquidity position over past four year, but in 2010 its liabilities increased and ability to repay debts decreased. Cash Flow to Debt=Operating Cash Flow/Total Liabilities| 2007| 3969/21196= 0,187| 2008| 3949/23732 = 0,166| 2009| 1894/22229 = 0,085| 2010| 3906/28011 = 0,139| 2. Debt Utilization ratio (www. moneycentral. msn. com) Cash Flow to Debt ratio helps to evaluate Dell ability to liquidate its total debts. From data given above, it is noticeable that total liabilities were increasing year by year while operating cash flow decreased from year 2007 to 2010.

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This leads to the fact that Dell may not be able to cover its debts. There are three parts in cash flow statement, so potential investors before deciding invest or not to company always carefully take a look in each of these parts. 1. Cash flow from operating activities. In 2009 this equivalent has significantly decreased to $1894. This was caused by decreasing in working capital. Even though in 2010 it has increased to $3906, but in comparison to year 2007 it also remain decreasing. This gives not very good sense for investors who are expecting steady growth. 2. Cash flow from investing activities.

Dell has negative cash here in 2010 and 2008 because of acquisition of business. This equivalent not makes bad sense for investors, because Dell is trying to raise company’s efficiency by purchasing investments. 3. Cash flow from financing activities. Dell has positive cash flow here in 2010 of $2012 while the last three years it was negative. This was caused by issuance of debt. But the worst indicator for investors is that Dell do not paid any dividends over last four years. To sum up, even though Dell is profitable, but it is essential to do cash flow analysis, because having liquidity and financial problems company may go to bankruptcy.


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