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Technology Stocks : Dell Technologies Inc.

DELL 133.20

+5.7%

Nov 26 3:59 PM EST

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To: TigerPaw who wrote (60483)	8/24/1998 2:39:00 PM
From: Chuzzlewit	Read Replies (2) of 176387

TigerPaw, I think that Meredith's importance to the company goes beyond spotlighting Return on Invested Capital. After all, that's an end, not a means. There was an article some time ago (sorry, I don't have the link) that pointed out that the means to achieving that end consisted of three components: negotiating favorable terms with vendors, accounts receivable management and days' inventory. The combination of these three factors is what Meredith terms the cash conversion cycle, and by focusing on the minimization of the cash conversion cycle you end up with an organization with sufficient cash generating power to fuel hypergrowth without resort to external financing. That article pointed out the the cash conversion cycle was approximately equal to the inventory average prior to Meredith's tenure at Dell. The cash conversion cycle is calculated as: CCC = Days in A/R + Days in Inventory - Days in A/P. It is currently an astounding -7 days!! Now Meredith promises to lower inventory levels to around 5 days. If that were the case now, Dell would have an extra $108 million in cash and/or marketable receivables. TTFN, CTC

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