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Technology Stocks : Dell Technologies Inc.
DELL 127.22+3.8%3:59 PM EST
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To: Voltaire who wrote (76939)11/7/1998 11:25:00 AM
From: Chuzzlewit  Read Replies (3) of 176387
 
Voltaire, what a number of people miss about Dell is the nature of the financial engine powering this juggernaut. When manufacturing companies experience hypergrowth they generally need to rely on external financing (either debt or equity) to fund the increases in accounts receivable, inventory, and capital expenditures. Meredith has focused on those issues which are under Dell's control and unified them by conceiving of a metric he calls the cash conversion cycle, which is a measure of how quickly orders are converted into cash. I think of it as a cash flow speedometer.

The faster an order is converted into product, the less inventory required to convert components into finished goods, the faster the goods find their way to the customer, the faster the customer pays for those goods, and the better the terms Dell receives from its suppliers -- these are all grist for the financial mill. But notice that execution depends upon many people working towards a common goal. Unless you understand the cash conversion cycle, you really cannot understand Dell. Meredith may have spearheaded this effort, but it is a team undertaking. And the success of this undertaking is manifested in a phenomenal ROIC.

TTFN,
CTC
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