Dell Inc. and Hewlett-Packard Company (HP) compete with eachother in the personal computer market. Dell's strategyis to assemble computers to customer orders, rather than forinventory. Thud, for example, Dell will build and deliver acomputer within four days of a customer entering an order on a webpage. Hewlett-Packard, on the other hand, builds somecomputers prior to receiving an order, then sells from thisinventory once an order is received. Below is selectedfinancial information for both companies from a recent year'sfinancial statements (in millions):
DellInc. Hewlet-Packard
Company
Sales 55,908 86,696
Cost of goodssold 45,620 66,440
Inventory, beginning ofperiod 459 7,071
Inventory, end ofperiod 576 6,877
- Determine for both companies (1) the inventory turnoverand (2) the number of days' sales in inventory. Round toone decimal place.
- Interpret the inventory ratios by consideringDell's and Hewlett-Packard's operatingstrategies.