1. ASHFORD BUS 630 Week 1 Assignment Dell, Inc.
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Assignment
1. Due by Day 7. Dell, Inc. Complete the following exercise (Research and
Application 2-28) and submit to your instructor.
The questions in this exercise are based on Dell, Inc. To answer the questions,
you will need to download Dell’s 2005 Form 10-K. You do not need to print this
document in order to answer the questions.
a. What is Dell’s strategy for success in the marketplace? Does the company rely
primarily on a customer intimacy, operational excellence, or product leadership
customer value proposition? What evidence supports your conclusion?
b. What business risks does Dell face that may threaten its ability to satisfy
stockholder expectations? What are some examples of control activities that the
company could use to reduce these risks? (Hint: Focus on pages 7-10 of the 10-
K.)
c. How as the Sarbanes-Oxley Act of 2002 explicitly affected the disclosures
contained in Dell’s 10-K report? (Hint: Focus on pages 34-35, 59, and 76-78.)
d. Is Dell a merchandiser or a manufacturer? What information contained in the
10-K supports your answer?
e. What are some examples of direct and indirect inventoriable costs for Dell?
Why has Dell’s gross margin (in dollars) steadily increased from 2003 to 2005, yet
the gross margin as a percentage of net revenue only increased slightly?
f. What is the inventory balance on Dell’s January 28, 2005 balance sheet? Why
the inventory balance is so small compared to the other current asset balances?
What competitive advantage does Dell derive from its low inventory levels? Page
27 of Dell’s 10-K reports a figure called the crash conversion cycle. The cash
conversion cycle for Dell has consistently been negative. Is this a good sign for
Dell or a bad sign? Why?
g. Describe some of the various types of operating expenses incurred by Dell.
Why are these expenses treated as period costs?
h. List four different cost objects for Dell. For each cost object, mention one
example of a direct cost and an indirect cost.