General Electric Financial Reporting Analysis

Topics: General Electric, Financial statements, Revenue Pages: 11 (3925 words) Published: April 28, 2011
Target Company Selection Process
The target company we decided on for our financial analysis is General Electric. At first we were looking at Starbucks, as it is a rapidly growing multinational corporation, but after some research we discovered that the earnings per share growth of Starbucks is 40.2%. Therefore Starbucks did not meet the requirement set at 50% EPS growth to be considered a truly “rapidly growing company”. We then continued our research and were able to find that General Electric has current EPS growth at 59.6%, which meets the requirement. Also, by searching through the annual 10-K we found the following information, which shows that GE is truly a multinational company and has more than 10% sales in other countries.

The following information is from page 8 of GE’s 2010 Form 10-K Annual Report filed in SEC EDGAR: Our global growth is subject to economic and political risks. We conduct our operations in virtually every part of the world. In 2010, approximately 53% of our revenue was attributable to activities outside the United States. Our operations are subject to the effects of global competition. They are also affected by local economic environments, including inflation, recession and currency volatility. Political changes, some of which may be disruptive, can interfere with our supply chain, our customers and all of our activities in a particular location. While some of these risks can be hedged using derivatives or other financial instruments and some are insurable, such attempts to mitigate these risks are costly and not always successful, and our ability to engage in such mitigation has decreased or become even more costly as a result of more volatile market conditions.

2. History of General Electric
In 1876 Thomas Alva Edison invented perhaps the greatest innovation of the age-a successful incandescent electric lamp. The Edison General Electric Company was established in 1890 and combined with the Thomas-Houston Company in 1892, creating the General Electric Company. During this period General Electric’s main offerings included lighting, transportation, industrial products, power transmission, and medical equipment (General History). The first GE appliances were introduced in the late 1890’s with the electric fan and expanded to a full line of heating and cooking devices in 1907. GE Aircraft Engines began in 1917 when the U.S. government began its search for a company to develop the first airplane engine “booster” for the fledging U.S. aviation industry. GE continued to grow by establishing their first GE plastics department during this time as well. GE’s worldwide activities are astounding. GE is currently entering the market in China through the infrastructure businesses. In Southeast Asia GE is “supplying cutting-edge technology to hospitals in Malaysia; helping to build the infrastructure of Indonesia; providing clean energy and water solutions to the Philippines; building aircraft engines in Vietnam; and much more” (GE World Activities). In Australia and New Zealand GE employs more than 6,000 employees across four businesses. Building a new Global Research Center in Munich, Germany, and helping build the infrastructure, GE is very involved in Europe. In the Middle East and Africa GE is building infrastructure as well as investing in oil, gas, and aviation. For Latin America, improvements in health care, transportation, infrastructure, clean water, and education are results of GE’s presence. GE is headquartered in North America and seeks to create jobs and opportunities everywhere they serve (GE World Activities). Overall, GE is in sixty-three countries, working with governments as well as impoverished people to create a better world through innovation and hard work. 3. GE Auditor and Accounting Standards

From 2007-2009 GE had KPMG LLP conduct independent audits. KPMG LLP is the U.S. member firm of KPMG International. “KPMG International’s member firms have 137,000...
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