Dell vs. Hp Performance & Finanical Analysis
Financial Analysis
Common-Size Analysis
Common-Size Income Statement Analysis
The common-size income statement for Dell shows a relatively flat history for cost of goods sold compared to sales from 82.27% in 2006 to 82.49% in 2010. Dell’s five year average for cost of goods sold to sales was 82.23%, which is bit higher than HP cost of goods sold to sales five year average of 75.96%. This in turn gives HP higher gross revenue than Dell most likely through means of obtaining raw materials and goods at lower costs, giving HP greater ability for an increased profit margin. This increased profit margin can allow for HP to offer more discounts then Dell may be able to afford, or increase spending in areas of investment for the company.
Another area of interest within the common size income statement is related to selling, general and administrative to sales. Overall through the years 2006 to 2010, Dell saw an increase in this area growing from 9.05% in 2006 to 12.22% in 2010. Meanwhile, HP experienced the exact opposite effect, with this category declining from 12.29% in 2006 to 9.99% in 2010.
According to Dell’s annual report, the major increase was due to the acquisition of Perot
Systems. It also appears that over the last five years, Dell’s strategy of products directly to customers has been adopted by many competitors, allowing the competitors to decrease some of their overhead and commissions paid to retailers, all the while increasing sales. In the same time span as competitors partially adopted the strategy that made Dell prominent, Dell began to place more products in retail stores to compete directly on the front lines with its competition, as mentioned in their Management’s Discussion and Financial Analysis meetings. This approach
FINANCIAL ANALYSIS OF DELL AND HP has caused a good percentage of the sales revenue to go to retailers and distributors, thus straining the ability to maximize net income for the present.
Research,
Common-Size Analysis
Common-Size Income Statement Analysis
The common-size income statement for Dell shows a relatively flat history for cost of goods sold compared to sales from 82.27% in 2006 to 82.49% in 2010. Dell’s five year average for cost of goods sold to sales was 82.23%, which is bit higher than HP cost of goods sold to sales five year average of 75.96%. This in turn gives HP higher gross revenue than Dell most likely through means of obtaining raw materials and goods at lower costs, giving HP greater ability for an increased profit margin. This increased profit margin can allow for HP to offer more discounts then Dell may be able to afford, or increase spending in areas of investment for the company.
Another area of interest within the common size income statement is related to selling, general and administrative to sales. Overall through the years 2006 to 2010, Dell saw an increase in this area growing from 9.05% in 2006 to 12.22% in 2010. Meanwhile, HP experienced the exact opposite effect, with this category declining from 12.29% in 2006 to 9.99% in 2010.
According to Dell’s annual report, the major increase was due to the acquisition of Perot
Systems. It also appears that over the last five years, Dell’s strategy of products directly to customers has been adopted by many competitors, allowing the competitors to decrease some of their overhead and commissions paid to retailers, all the while increasing sales. In the same time span as competitors partially adopted the strategy that made Dell prominent, Dell began to place more products in retail stores to compete directly on the front lines with its competition, as mentioned in their Management’s Discussion and Financial Analysis meetings. This approach
FINANCIAL ANALYSIS OF DELL AND HP has caused a good percentage of the sales revenue to go to retailers and distributors, thus straining the ability to maximize net income for the present.
Research,