Dell may need that "float" if economy remains weak
The Wall Street Journal story on Dell needing its "float" more than ever.
Dell is decidedly not cash-poor. But if its balance sheet weakens, the company could lose one of its key advantages: the ability to strong-arm suppliers into waiting 37 days, on average, to be paid for their goods. Dell is paid by its customers instantly, so the company makes the most of this "float."
Working capital, a measure of liquidity, has declined markedly at Dell in recent years. It is used to finance production of goods before they are sold and consists of current assets minus current liabilities.
In 2000, the company's working capital was $2.5 billion; in the August quarter, it was $238 million.
The company said the decline was a result of its ability to stretch out payments to its suppliers.
Dell's liabilities are up 48 percent in two years, to $9.5 billion; assets are up only 17 percent, to $14 billion.