For the company General Electric, complete a financial statement analysis of the
ID: 2789174 • Letter: F
Question
For the company General Electric, complete a financial statement analysis of the company using the information from Yahoo Finance and Reuters. Be sure to discuss significant changes in the Income Statement, Balance Sheet, and Statement of Cash Flows. Compare the financial ratios for the firm over time and also compare the company’s most recent ratios to the industry averages/medians. (Use at least two ratios from each of the categories: liquidity, asset management, debt, and profitability. Interpret how the company’s ratios compare to those of the industry average. This requires answering the following questions. Is the company more or less liquid? Does the company use more or less debt? Is the company’s use of assets more or less efficient than the industry? Industry data is available on Reuters and Yahoo Finance. Is the company more or less profitable than the industry?) (Readily available ratios: Current ratio, quick ratio, inventory turnover, total asset turnover, days sales outstanding, debt ratio, times interest earned (or interest coverage), net profit margin, return on assets, and return on equity.)
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = (Current Assets - Inventories) / Current Liabilities
Inventory Turnover = Cost of Goods Sold / Average Inventory
Total Asset Turnover = Net Income / Total Assets
Days Sales Outstanding = [Accounts Receivable / (Annual Credit Sales / 365)]
Debt Ratio = Total Debt / Total Assets
Timers Interest Earned = EBIT / Interest Charges (EBIT = Earnings before Interest and Tax)
Net Profit Margin = Net Income / Total Sales x 100
Return on Assets = Net Income / Total Assets
Return on Equity = Net Income / Shareholder Equity
Sources:
https://finance.yahoo.com/quote/GE?p=GE
https://www.reuters.com/finance/stocks/overview/GE.N
Explanation / Answer
Growth Profitability and Financial Ratios for General Electric Co Financials Profitability 2007-12 2008-12 2009-12 2010-12 2011-12 2012-12 2013-12 2014-12 2015-12 2016-12 Industry Comments Net Margin % 12.86 9.5 6.84 7.55 8.91 9.26 8.94 10.25 -5.23 6.61 7.97 Mostly ar par or sometimes better than Industry average Return on Assets % 2.98 2.18 1.36 1.48 1.79 1.95 1.95 2.33 -1.08 1.91 2.5 Mostly ar par or sometimes better than Industry average Return on Equity % 19.49 15.74 9.66 9.6 11.15 11.39 10.3 11.78 -5.42 9.39 11.5 Useually below industry average, in some years done well Interest Coverage 2.12 1.73 1.55 1.89 2.38 2.39 2.6 2.82 3.36 2.8 7.7 Below par than industry standards Liquidity/Financial Health 2007-12 2008-12 2009-12 2010-12 2011-12 2012-12 2013-12 2014-12 2015-12 2016-12 Current Ratio 1.99 2.02 2.76 2.44 2.08 2.34 2.53 2.53 1.61 1.93 1.05 Better than industry average Quick Ratio 1.94 1.97 2.7 2.38 2.02 2.26 2.42 2.42 1.4 1.65 0.83 Better than industry average Debt/Equity 2.76 3.15 2.88 2.63 2.25 2.09 1.86 1.74 1.5 1.39 0.83 Better than industry average Key Ratios -> Efficiency Ratios Days Sales Outstanding 409.38 43.67 44.08 42.62 47.27 50.82 53.59 54.81 78.14 75.39 76 Below par than industry standards Inventory Turnover 6.02 6.31 5.92 6.1 5.39 5.1 4.72 4.64 4.11 3.9 3.29 Better than industry average Asset Turnover 0.23 0.23 0.2 0.2 0.2 0.21 0.22 0.23 0.21 0.29 0.41 Below par than industry standards