Sunday, August 26, 2012

The Downside To A Fast Cash Cycle

As PC sales have slowed industry wide, Dell's sales have slipped as well. One of Dell's claims to fame and a reason for its profitability is a fast cash cycle. In fact, during many years, Dell had a negative cash cycle. But Dell's slowing sales and cash cycle have caused a problem. When sales are increasing, the company is getting paid to make products faster than it is making them. When sales slow, the cash needed to pay for old orders can become greater than the cash received from new orders.