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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: jhg_in_kc who wrote (72774)	10/17/1998 5:54:00 PM
From: Chuzzlewit	Respond to of 176388

JHG, I keep reminding you that I'm no gentleman, I'm a pussycat. Equity is the net historic origination value of the stock Dell has sold over the years plus accumulated profits (retained earnings). You can get this number directly from the balance sheet. If you divide the current period's earnings by the previous period equity you get the return on equity (ROE) for the period. But ROE is frequently a misleading number as a benchmark for company performance, because a company can increase it's ROE by borrowing money and using the funds to repurchase stock. A better, and more conservative approach is to use the total long-term capital resources of the company (invested capital) in the denominator. Invested capital is defined as the sum of the equity and long-term debt. Long-term debt can be found on the balance sheet just below current liabilities. ROIC substitues invested capital for equity in the denominator, thus avoiding the problems associated with ROE. ROE and ROIC are best expressed as annualized numbers. DELL has the highest ROIC of any company I have seen. This is a direct consequence of keeping inventories very low and relying on outside vendors to supply components. I hope this helps. TTFN, CTC