Corporate Finance Assignment/ Professional Essay Writers
Dell Inc., headquartered in Austin, Texas, is the global leader in selling computer products and services.
The following is Dellâ€™s (simplified) balance sheet from a recent year.
at February 3, 2006
(dollars in millions)
Cash â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..$ 7,042
Short-term investments â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦. 2,016
Receivables and other assets â€¦â€¦â€¦â€¦â€¦â€¦. 5,452
Inventories â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦. 576
Other â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.. 2,620
Property, plant, and equipment â€¦â€¦â€¦â€¦â€¦.. 2,005
Long-term investments â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.. 2,691
Other noncurrent assets â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.. 707
Total assets â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦ $23,109
Liabilities and Stockholdersâ€™ Equity
Accounts payable â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦$ 9,840
Other short-term obligations â€¦â€¦â€¦â€¦â€¦â€¦â€¦ 6,087
Long-term liabilities â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦ 3,053
Contributed capital â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦ 284
Retained earnings â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.. 3,845
Total stockholdersâ€™ equity and liabilities â€¦… $23,109
Assume that the following transactions (in millions of dollars) occurred during the remainder of 2006 (ending on January 28, 2007):
a. Issued additional shares of stock for $200 in cash.
b. Borrowed $30 from banks due in two years.
c. Purchased additional investments for $13,000 cash; one-fifth were long term and the rest were short term.
d. Purchased property, plant, and equipment; paid $875 in cash and $1,410 with additional long-term bank loans.
e. Lent $250 to affiliates, who signed a six-month note.
f. Sold short-term investments costing $10,000 for $10,000 cash.
g. Dell does not actually pay dividends; it reinvests its earnings into the company for growth purposes.
Assume instead of this problem that Dell declared and paid $52 in dividends during 2006.
1. Prepare journal entry for each transaction.
2. Create T-accounts for each balance sheet account and include the February 3, 2006, balances.
Post each journal entry to the appropriate T-accounts.
3. Prepare a balance sheet from the T-account ending balances for Dell on January 28, 2007, based on these transactions.
4. Compute Dellâ€™s financial leverage ratio for 2006 (year ending on January 28, 2007). What does this suggest about the company? Get FInance Help Today