Business Analysis II: General Electric Company Financial Analysis Cristina Mota Crespo
University of Phoenix
September 26, 2012
Prof. Elsie Jimenez-Galarza
General Electric Company Financial Analysis
This essay is continuation of the financial evaluation from last week; we had to choose a company among the Fortune 500 in my case I chose GE Company. This Finance is about the study of money, it helps managers and senior leadership in an organization to be able to make better objective decisions (Blacconiere & Hopkins, 2002). Every company must invest in having an accountant which will create financial statements that provides information about the financial performance of a company. Financial analysts write reports and papers for their managers to explain and put into words the findings of these statements; it’s their job to interpret the numbers for those who are not financially inclined. A financial statement analysis is the process of identifying the company’s financial strengths and weaknesses and establishing relationship between the balance sheet and the profit and loss account (Dragolea & Cotirlea, 2009). These analyses play a dominant role in setting the framework of managerial decisions.
When measuring the financial health of a company we must have knowledge and answers to certain question like: How much profit is it earning? , On what does it spends its income and where? , What is the source of the revenue?. All the answers to these questions can be found in the company’s financial record and they have to make these records available to the community. These financial records are divided in different parts: balance sheet, prediction of cash flow and the profit and loss records. For an organization to have success and survive all the assets must be greater than the sum of all liabilities. Active assets like cash must cover existent liabilities like justly due utilities, current-year loans or deferred revenues. When an organization’s capital and its values go beyond its liabilities it’s a sign that they are not putting their money to good use.
General Electric Company is classified as one of the biggest and most miscellaneous industry in the world (Blacconiere & Hopkins, 2002). General Electric company consolidated revenues have been decreasing since 2010 from $154,438 billion to last year’s $147,300 billion in; this decrease in earnings came as a direct result from the 2007-2012 Global Financial Crisis. This phenomenon played a significant role in the failure of some business, declining the housing market resulting in evictions and foreclosures, downturns in stocks and the increase of unemployment. Earnings attributable to GE company from NBCU branch where approximately $14.1 billion in year 2011 and from GE ex NBCU $13 billions. Also, cash flow from operating activities from GECS Dividend and from Industrial CFOA for year 2011 was $12.1 billion. The General Electric Company had a growth of 22% in Operating EPS and 20% rise in their Operating earnings for last year report. The GE Works 2011 Annual Report (2011) establishes that record equipment and service orders increase the industrial backlog to a $200 billion a new record for the company. Their internacional sales of American-made products totaled in $18 billion witch greated a $1 biilon more since the year 2010, witch in return created at leat 13,000 new jobs in United States since 2009 as a result of the financial crisis they went trough (General Electric Company, 2011). Competitors of GE like Siemens AG (SI) which is a electronics and electrical engineering company with headquarters in Munich, Germany closely compete in a direct and indirect way with the company through investments with General Electric’s Industry, Energy and Healthcare sectors. These companies focus their business in providing industrial automation and control, information and communication, power transportation and...
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