Response to the following problem:
Dell Inc. and Hewlett-Packard Corporation (HP) compete with each other in the personal computer market. Dell's strategy is to assemble computers to customer orders, rather than for inventory. For example, Dell will build and deliver a computer within four days of a customer entering an order on a Web page. Hewlett-Packard, in contrast, builds some computers prior to receiving an order, then sells from this inventory once an order is received. Below is selected financial information for both companies from a recent year's financial statements (in millions).
|
|
Dell
Inc.
|
Hewlett-Packard
Corporation
|
|
Sales
|
$35,404
|
$45,955
|
|
Cost of goods sold
|
29,055
|
34,573
|
|
Inventory, beginning of period
|
278
|
5,204
|
|
Inventory, end of period
|
306
|
5,797
|
a. Determine for both companies (1) the inventory turnover and (2) the number of days' sales in inventory. Round to one decimal place.
b. Interpret the inventory ratios by considering Dell's and Hewlett-Packard's operating emphases.