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Incremental Sales in 1996 Addnl. Operating Assets (32%) (Total Assets - ST Invest.

In USD M 1,821 582

5296 52% 4.29% 227

Forecasted 1996 Balance Sheet (In USD M) 1995 Actual Y.E. Jan 29, 1995 % 0f 1995 Sales Current Assets: Cash ST Investments A/R, net Inventories Other Total Current Assets P, P & E, net Other Total Assets Addnl. Funding Needed Current Liabilities: A/P Accrued & Other Liabilities Total Current Liabilities Long Term Debt Other Liabilities Total Liabilities Stockholders' Equity: Preferred Stock Common Stock Retained Earnings Other Total Stockholders' Equity 43 484 538 293 112 1,470 117 7 1,594 1.24% 13.93% 15.48% 8.43% 3.22% 42.30% 3.37% 0.20% 45.87% 31.94%

403 349 752 113 77 942

11.60% 10.04% 21.64% 3.25% 2.22% 27.11%

120 242 311 -21 652 1,594

18.76% 45.87%

As of 1995, Dell would be projected to be able to grow at 52% without increasing its leverage and Actual 1996 Balance Sheet Compared to Projections Y.E. Jan 28, 1996 Current Assets: Cash ST Investments A/R, net Inventories Other Total Current Assets P, P & E, net Other 29% Total Assets

Forecast for 1996 Fixed Liabilities 66 484 820 447 171 1,987 178 11 2,176

55 591 726 429 156 1,957 179 12 2,148

Addnl. Funding Needed Current Liabilities: A/P Accrued & Other Liabilities Total Current Liabilities Long Term Debt Other Liabilities Total Liabilities

354

466 473 939 113 123 1,175

403 349 752 113 77 942

Stockholders' Equity: Preferred Stock 6 Common Stock 430 Retained Earnings 570 Other -33 49 Total Stockholders' Equity 973 879 Common stock to employees 2,148 2,176 5.10% 45 227 Dell internally funded a 52% growth in sales largely by increasing its asset efficiency and profitab

of Sales in 1996, as compare 924 49

additional equity issued

Growth in 1996 sales Actual net profit margin in 1995

4.29% 227 227

2,176 Forecast for 1996 with Actual 1996 Sales Fixed Liabilities 66 484 820 447 171 1,987 178 11 2,176 354

1,692 582

403 349 752 113 77 942

879 2,176

ithout increasing its leverage and issuing further equity shares.

Variance

Y.E. Jan 28, 1996 Proportional Liabilities -11 107 -94 -18 -15 (30) 1 1 (28) 55 542 726 429 156 1,957 179 12 2,148

63 124 187 46 233

466 473 939 113 123 1175

94 (28)

6 430 570 -33 973 2148

ng its asset efficiency and profitability. Total Operating assets at 29% of Sales in 1996, as compared to projected 32%

5.1% vs. 4.3%

1995 Actual Net Profit Margin Projected Net Profit for 1996

tual 1996 Sales Prop. Liabilities 66 484 820 447 171 1,987 178 11 2,176 (80)

582 (80)

614 532 1,146 113 117 1,376

211

879 2,176

Forecast for 1996 Variance Proportional Liabilities 66 484 820 447 171 1,987 178 11 2,176 -11 58 -94 -18 -15 -30 1 1 -28

-135

107

135

582 447

58 Extra Actual Funding in 1996

(80) forecast vs. actuals -67 17.7% 46

614 532 1146 113 117 1376

-148 -59 -207 0 6 -201

63 124

505 Total Increase in Funding in 1996

879 2,176

94 (28)

973

45

272 Increase in Equity w/o 49 -22

5.14% NP Margin 1996 20.15% GP Margin 1996 21.24% GP Margin 1995

Extra Actual Funding in 1996

Total Increase in Funding in 1996 over 1995

n Equity w/o 49

Addnl. Sales Addnl. Operating assets Actual 1996 Sales Gross Margin Forecasted 1997 Balance Sheet (In USD M) 1996 Actual

Y.E. Jan 28, 1996 Current Assets: Cash ST Investments A/R, net Inventories Other Total Current Assets P, P & E, net Other Total Assets Addnl. Funding Needed Current Liabilities: A/P Accrued & Other Liabilities Total Current Liabilities Long Term Debt Other Liabilities Total Liabilities Stockholders' Equity: Preferred Stock Common Stock Retained Earnings Other Total Stockholders' Equity 55 591 726 429 156 1,957 179 12 2,148

466 473 939 113 123 1,175

6 430 570 -33 973 2,148 44 days of sales 56 days of COGS

To fund the shortfall of 984 M through increased asset efficiency, Dell needs

Current CCC (Cach to Cash Cycle) 40 days CCC has to become negative to fund the shortfall of 984 M HOW? Savings from Hypothetical WC improvements DSI Q4 1996 Actual Hypothetical improvements 1997 Projected Hypothetical improvements * Daily Savings 31 -17 14 17 17.6

Annual Savings Total Savings in USD M

299.55 983

Improvement in Profitability in 1997 can also eliminate the shortfall of 984 M - 1% increase in margin will inc Margin improvements reduce the required working capital improvements as above - A combination of both seems to be the only reasonable alternative to fund the shortfall. Repurchase of Stock indicates under valuation in the market and leads to increase in value. Actual profit margin 1997

Actual 1997 CCC

13

2,648 779 5,296 20.15% 1996 Actual

% 0f 1996 Sales 1% 11.2% 14% 8% 3% 37.0% 3.4% 0.2% 41% 29.40%

408 Projected 1997 Net Profit 5.1% 7,944 Projected 1997 Sales 7,944 1,601 1,601 Projected Gross Profit 22.1 45 Daily COGS 17.6 56 Forecast for 1997 with a 50% Sales Increase Debt repaid & $500 Equity Fixed Liabilities Prop. Liabilities Buyback 83 591 1,089 644 234 2,640 269 18 2,927 371 83 591 1,089 644 234 2,640 269 18 2,927 (161) 83 591 1,089 644 234 2,640 269 18 2,927 984

779

9% 9% 18% 2% 2% 22%

466 473 939 113 123 1,175

699 710 1,409 113 185 1,706

466 473 939 123 1,062

18% 41%

1,381 2,927

1,381 2,927

881 2,927

DSO 42 -15 27 15 22.1

DPO 33 20 53 20 17.6

CCC 40 -52 -12

331.00 904

352.42

ll of 984 M - 1% increase in margin will increase net income by 79 M. ements as above - A combination of both profitability & WC improvements

leads to increase in value. 6.68% 7759 M sales, 518 M ST Inv. Increased to 1237 M from 591 M LT debt reduced to 18 M from 113 M Common stock reduced from 430 M to 195 M Inventories 251 M 903 M A/C Rec., 1040 M A/c payable 37 54 (4)