General Electric

 Introduction
General Electric (GE) has gone an enormous way from a modest laboratory of the great
inventor to the corporation on top with a huge number of subsidiaries and divisions, operating
in practically all countries of the world. Current activities of General Electric are the
development of new, high-speed and reliable aircraft engines, research on processing of
inorganic debris, creating cleaner synthetic resins and plastics and, of course, the production
of household appliances (including refrigerators). It was set up in April 1892 after the
alliance with Thomson-Houston Electric. For 122 years, GE’s managers have been creating a
diversified company of the leading industries among their spheres. They developed a wide
range of corporate programs in order to expand production and reduce costs. Continuous
development of financial resources and internal controls allowed the company to grow even
during the most difficult periods.
Summary of Operations
A. Net Sales = Sales – Returns inwards (sales returns):
2011 2012 2013
Net Sales, USD millions 146,542 146,684 146,045
B. Gross Margin = Gross Profit / Net Sales * 100%; Gross Profit = Sales – Cost of goods
sold; or Total Revenue – Cost of revenue total:
2011 2012 2013
Gross Margin, % 44.0 41.4 40.8
C. Operating Margin = Operating Income / Net Sales * 100%:
2011 2012 2013
Operating Margin, % 14.2 12.4 11.6
D. Income before Taxes or Earnings Before Interest and Taxes = Total Revenue –
Operating Expenses = Operating Income:
2011 2012 2013
Operating Income, USD millions 20,821 18,192 17,000
E. Net Income = Total Revenue – Total Expenses; and is given in Income statement.
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Sample: Management - Financial Analysis Paper
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2011 2012 2013
Net Income, USD millions 14,151 13,641 13,057
F. Summary of Operations Data Assessment/Interpretation
Net Sales are aimed at providing either the actual sales made by the company or the amount
of funds that it expects to gain. As GE didn’t have any sales returns, Net Sales is equal to
Total Revenue, which means that all forms of sales and related deductions are aggregated
into a single line item. Gross Margin is a good indication of how profitable a company is at
the most fundamental level. GE has enough money left over to spend on other business
operations, such as research and development or marketing. Operating Margin demonstrates
the level of financial risk, so GE is under high level of financial risk. Concerning Operating
Income the higher its level, the more profitable a company’s core business is. Shareholders
take into account the value of Net Income because it is the crucial source of payment to them
(by means of dividends and share buybacks), and in case a company cannot make a sufficient
amount of profit in order to reward owners, the shares’ value will drop.
Financial Position
A. Working Capital = Current Assets – Current Liabilities:
2011 2012 2013
Working Capital, USD millions 250,442 258,620 30,687
B. Net Property, Plant & Equipment
2011 2012 2013
Net Property, Plant & Equipment, USD
millions
65,739 68,633 68,827
C. Total Assets is the final amount of all gross investments, cash and equivalents,
receivables, and other assets as they are presented on the balance sheet. Total Assets are
given in Balance Sheet:
2011 2012 2013
Total Assets, USD millions 718,189 684,999 656,560
D. Long Term Assets are those held on a company’s balance sheet for more than one year:
2011 2012 2013
Long Term Assets, USD millions 241,858 202,237 455,820
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E. Stockholders’ Equity = Total Assets – Total Liabilities. Stockholders’ Equity is given in
Balance Sheet:
2011 2012 2013
Stockholders’ Equity, USD millions 116,438 123,026 130,566
F. Financial Position Data Assessment/Interpretation Summary
Working capital discloses the condition of the financial position of a company better than any
other indicator. It tells what would be left if a company raised all of its short term resources,
and used them to pay off its short term liabilities. GE’s Working Capital in 2013 decreased
almost 8.5 times due to Total Receivables. So the company experiences a financial strain. As
for Property, Plant & Equipment, the company is provided with necessary stuff and supports
it at appropriate level. Long Term Assets of GE are Net Property, Plant & Equipment, Net
Goodwill, Net Intangibles, Long Term Investments and Note Receivable – long term.
Stockholders’ Equity of GE means that, for example, after liquidation of all company’s
assets, its stockholders will be rewarded.
Financial Ratios
A. Liquidity refers to the business’ ability to pay its bills, dues and other similar short term
obligations (as and when they become due) without affecting the normal operations. Current
ratio is the measurement of the company’s ability to pay short-term obligations and is
calculated as Current Assets