Business Analysis II: General Electric Company Financial Analysis Cristina Mota Crespo University of Phoenix MGT/521 Management 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. 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 other products operating in over 190 countries. Siemens AG revenue for 2011 is approximately $99 billion which is less when we compare it with GE $147. 3 billion. Also; Citigroup, Inc. another competitor for the GE Company made a total of $64. 95 billion in 2011, and when we compare it with GE and SI its earnings where even less in the same year, making General Electric a leader in the industry.
With this valuable information GE management can analyze its competitor’s financial statements results and from there they can evaluate their faults and create new ways to increase their annuals earnings and secure their place as one of leading companies in their industry. Another way GE can go forward in the industry is by adapting its services and products to other countries that need them.
To maintain its leading position GE posses Advance Technology Programs witch conduct researches in nanotechnology, molecular medicine, energy conversion, advance propulsion, sustainable energy and organic electronics (General Electric Company, 2012). One of the advance technologies that GE and SI have in common is the research in molecular imaging and diagnosis; GE trying to create new tools for physicians so in the future they could better and faster diagnose person’s diseases with their own molecular makeup (Ciabuschi, 2005).
Siemens Ag on the other hand is trying to improve MRI’s so they can create a single continuous move which will result in faster scanners and increase image quality and they are also doing researches in the molecular department. On the other hand GE and Citigroup, Inc. is involve in the banking and financial services and it is an American company and they compete with GE in the customer service department; since Citigroup, Inc provides more financial services like loans for home and auto is it for personal or for a two wheeler than GE that only gives loans for auto and for personal use.
General Electric as a leading company in its industry have advocated for the free flow of products and services to their clients in different countries. In the last decade, international trades have raise standards in the development of new economies, spur innovation and lift hundreds of millions out of poverty (General Electric Company, 2011). A great way to see how GE has globalize itself it’s with the new way they operate, because GE has been moving their main offices from United States to other countries.
An example of this was their head offices for health care business located in London, they also relocated the headquarters that sells equipment, oil and gas to Florence Italy and many other HQ moves from United States to Shanghai, China; Bangalore, India and also Munich, Germany. GE establish (2001), that the reasons for making this moves where that they gave country managers more power and is in this company believes that to succeed internationally they must be closer to their customers.
In addition to this strategy of moving their management ranks, GE have encourage their American managers to seek personal improvement by traveling overseas for management training and company events as learning experience. This aggressive investment in globalization is a direct result of how much the technology is changing and will change in the future; now days we have a variety of way to communicate with managers, business partners and employees and GE have use this to invest in new industries and to expand.
As they expand their products we will see an increase in their revenues and a increase in the economy as a result. Another great way for a management to evaluate company’s aspects is doing or creating a benchmarking analysis, in which they will compare the best practices in their own sector. This analysis allows any company to make improvement in their products and incorporate new practices to increase their performance for companies that seek new challenges (Dragolea & Cotirlea, 2009).
GE rapidity figures out that there were business or companies who could help reduce their energy, water use, waste, and carbon emissions. The company saw they could use the sustainability concept not only as an internal cost, but also as an opportunity to help other companies move along the sustainability path. GE in 2005 establishes the concept of Ecomagination as a different branch of the company that identifies and delivers market-leading environmental solutions (General Electric Company, 2012).
They encourage their employees to see new ways to save energy in their homes and where they could be found; and once they validated these solutions within their universe these ideas were turn into products and later were sold to customers around the world. As a direct result from this practice GE generated sustainability sales of $21 billion in 2011 and invested over $2 billion in new product research; so now the company is aiming to keep increasing their revenues for next year (General Electric Company, 2011).
The increase of GE business is a reflection of their widespread variety of products and services; all GE businesses have one important trait: [“each harnesses the power of imagination to make life better for our customers and consumers all around the world”] (GE Imagination at Work Company, 2012). GE imagination at work offers aproximately 400 product for its clients, ranging from refrigeratos to cooking appliences, they have washingmachines that use less water and energy and provide better results and more durability.
Also they produce lighting producs that helps reduce the risk of global climate change like energy smart light bulbs, GE LED trafic and rail signals that help saves energy (Blacconiere & Hopkins, 2002). Other services they provide are customer training to challenge and help industries grow, healthcare services in the diagnosis sector to facilitade early diagnosis, intervention and prevention of diseases; and also since the beginig they work with electrical distribution and oil and gas witch help meet the global demand for this producs.
General Electric recognizes that part of being successful and well respected in the business world is by being socially responsible of the effects humanity has in our world. This company will keep expanding for years to come, because its willing to invest in the conservation of the enviroment by creating new products for their “Go Green” customers. Like any other company GE keeps evolving and its revenues will increase in the future, it all depends in how they keep managing their comapany, employees and to maintain the quality of their products.
If they keep implementing and creating new concept they will expand to new industries before we know. This business analysis help expand my knowledge with this company, because before this the GE company for me only work in the energy industry. I can honestly say that I didn’t know much they had expand in all these years and made me realize that big companies that a major role in the economy, without them creating new jobs we couldn’t have middle class workers improving each day. Reference Blacconiere, W. G. & Hopknis, P. E. (2002).
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