Question & Answer: The following income statement data (in millions) for Dell Inc. and Hewlett-Packard Company (HP) were taken from their recent annual reports: Dell He…..

The following income statement data (in millions) for Dell Inc. and Hewlett-Packard Company (HP) were taken from their recent annual reports: Dell Hewlett-Packard Net sales $62,071 $120,357 Cost of goods sold (expense) (48,260) (92,385) Operating expenses (9,380) (39,029) Operating income (loss) $4,431 $(11,057) Required: A. Prepare a vertical analysis of the income statement for Dell. Round percentages to one decimal place. (Note: Use a minus sign (-) to indicate a net loss.) B. Prepare a vertical analysis of the income statement for HP. Round percentages to one decimal place. (Note: Use a minus sign (-) to indicate a net loss.) C. Based on (A) and (B), how does Dell compare to HP?

Expert Answer


Vertical analysis
Dell		%
Net sales	62,071	100%
cost of goods sold	48,260	77.7%
operating expense	9,380	15.1%
operating income	4,431	7.1%


HP
Net sales	120,357	100%
cost of goods sold	92,385	76.8%
operating expense	39,029	32.4%
operating income	-11,057	-9.2%


the dell is more profitable than Hewlett , its operating expense is
less compared to HP’s operating expense >thus we see that
Hewlett must control its operatinge xpense to be profitable

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