Evaluation of Corporate Performance

The two selected companies for comparison are Dell Technologies and Apple Inc. These companies are electronic companies that engage in production of electronics ranging from computers to phones to tablets among other computing device. Both companies focus on development and expansion of their strategic products for productivity and to remain competitive in the markets. Both companies have experienced remarkable growth over years and continue to compete against each other in the markets. This paper aims at comparing the capital expenditure of these two companies to better understand how each operates when it comes to capital spending.

The capital spending for the two companies has been associated with funds to upgrade, acquire as well as maintain physical assets among others. Based on the financial reports of the companies obtained from Yahoo finance, Dell’s capital spending for the past three years is as follows; $482,000 in 2016, $906,000 in 2017, and $1,581,000 in 2018 (Dell Technologies Inc., 2019). On the other hand, capital spending for Apple is $13,548,000 in 2016, $13,313,000 in 2017 and $12,795,000 in 2018 (Apple Inc. (AAPL), 2019). From this information, it is clear that both Apple’s and Dell’s capital expenditure tends to be consistent.

Dell has minimal differences on capital spending amount across the three years. The difference is $424,000 between 2017 and 2016 and $674,000 between 2017 and 2018 (Dell Technologies Inc., 2019) It is worth noting that the apple’s capital spending decreased slightly in 2017 but increased in 2018. On the other hand, Apple has significant differences in capital expenditure amount. The difference is $235,000 between 2017 and 2016 and $518,000 between 2017 and 2018 (Apple Inc. (AAPL), 2019). These results are achieved through simple calculation where we subtract the capital expenditure of one year from the other. Unlike Apple whose capital expenditure decreased in 2017, Dell’s capital spending increased in 2017.

The companies were both engaged in repurchase of common stock and payment of dividends. They were also engaged in purchase of investments, investment of property and plant over the three years. However, Apple spend much more on investment as compared to Dell. Dell spends much more on debt repayment compared to Apple. This could be as a result of the low net income it generates compared to Apple resulting to more borrowing to facilitate its activities and operations.

There are several factors to consider when making capital expenditure decisions These include availability of funds and expected returns from the investment among others. Management considers these factors when making corporate investment decisions (Good man et al, 2014). Apple could be investing more due to availability of funds. The company could be engaged in long-term investments that require a lot of money because of availability of funds. For instance, in 2018, Apple’s net income was $59,531,000 meaning it had funds to make long-term investments unlike Dell that had losses of $3,728,000.

The expected returns also influence capital expenditure decisions. Both companies invest in projects they believe will result to long-term financial profitability. Apple seems to do it strategically earning it profits compared to Dell. The continuous losses experienced at Dell over the past three years indicate that the company is spending more that it is generating. A thorough comparison of capital spending between Dell and Apple brings about similarities and differences across the two companies.

Apple spent a relatively huge amount of money on purchase of investments when compared to Dell. For instance, in 2017 Apple spent $73,227,000 compared to Dell $4,389,000 (Apple Inc. (AAPL), 2019; Dell Technologies Inc., 2019). Similarly, in 2018 Apple spent $40,631,000 while Dell spent $925,000. It is worth pointing out that both companies had high spending on purchase of investments in 2017 that dropped in 2018. In terms of other investing activities, Dell seems not to take much risk to invest in other activities. This could be due to the losses the company has incurred continuously over the past three years. The amount spent on investing in other activities in 2018, for instance, is only $41,000 for Dell while Apple spent at least $1,078,000 (Apple Inc. (AAPL), 2019; Dell Technologies Inc., 2019). This illustrates that Apple believes in investing in other activities to generate it some more income.

In conclusion, capital expenditure is critical in any business. Apple’s and Dell’s capital expenditure illustrate how business in the same industry make decisions when it comes to capital spending. Companies with funds are likely to make more capital investments compared to those without funds. Apple invests hugely due to availability of funds and the expected high returns. Dell needs to strategize itself to engage in ventures that will generate it more income thus more investment.

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