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Technology Stocks : Dell Technologies Inc.
DELL 122.55+4.4%Nov 21 9:30 AM EST
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To: KwanK who wrote (103522)2/21/1999 7:37:00 PM
From: Mohan Marette  Read Replies (1) of 176387
 
Here is one way to skin the 'CAT' (ROIC) & this is a good thing...

Kwan:
This is one way to do it. Anyway why do you want to do the calculation for DELL again ,you don't trust them????

====================
(Source: I don't recall.)

>>>'In essence, what ROIC looks to capture is the amount of cash generated by the company's ongoing operations relative to the capital needed to generate that cash. As a result, return on invested capital is simply the company's net operating profit after tax (NOPAT) divided by its invested capital. NOPAT is equal simply to sales minus operating expenses minus taxes. (Keep out interest earnings or one-time deals from the sales number.)

To find "invested capital," just take a company's assets, subtract its current liabilities, then subtract the cash it has on the balance sheet. This is the amount of money the company has spent on working assets less the normal cash that flows in and out. (To figure out a company's ROIC for a given period, you need to calculate these numbers at the beginning of the period and at the end, and average them.) A company like Dell has few assets--relative to its sales--and high liabilities, since it waits to pay its suppliers until after it gets paid by its customers. As a result, its return on invested capital is astronomical.

This is a good thing if you're a Dell shareholder.

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