Week 6 Discussion 1
Using the same company and annual reports that you chose for your Reading and Using the Annual Report Case Study discussion forum in Week 1,
- Prepare a comparative balance sheet, income statement, and statement of cash flows, and perform a horizontal analysis of the company’s balance sheet, income statement, and statement of cash flows for the most recent 2 years. Identify at least one significant change (increase or decrease) from one year to the next in a balance sheet account, income statement account, and statement of cash flows account.
- Identify the causes of the change in each of these accounts.
- Discuss the implications of each of these account changes, and your assessment of the company based on these changes. Do these changes reflect positively or negatively on the company, and what is your assessment of the outlook for the company?
Your initial response should be a minimum of 200 words. Graduate school students learn to assess the perspectives of several scholars. Support your response with at least one scholarly and/or credible resource, in addition to the text.
Running Head:
WEEK 1 DISCUSSION
2
WEEK 1 DISCUSSION 2
Week 1 Discussion Forum
Marquita Green
Ashford University
My company of interest that trades on the New York Stock Exchange is General Electric (GE).
Current ratio = current assets/current liabilities
Year 2019: Current assets = $126.066 billion
Current liabilities = $74.259 billion
Current ratio = 126.066/74.259
= 1.698: 1
This current ratio indicates that General Electric can meet its current liabilities 1.698 times using its current assets before they are depleted.
Year 2018: Current assets = $107.922 billion
Current liabilities = $60. 451 billion
Current ratio = 107.922/60.451
= 1.785:1
This ratio shows that GE can meet its current liabilities using its current assets 1.785 times.
In comparing these two ratios, GE performed better in the year 2018 as compared to 2020.
Profit margin = gross profit/revenue * 100
Year 2019: gross profit = $25.186 billion
Revenue = 95.214 billion
Profit margin = 25.186/95.214 * 100
= 26.45%
This ratio indicates that 26.45% of total sales was gross profit.
Year 2018: Gross profit = 24. 194 billion
Revenue = 97.0112 billion
Profit margin = 24.194/97.0112 * 100
= 24.94%
This ratio shows that 24.94% of sales was gross profit.
In the latest report, the management discussion and analysis comments show that GE’s unrealized losses are attributed to the fair value of its securities which have been in a loss position. The comments also indicate that the current valuation was also not well adhered to thus altering the results. GE’s 2019 financial year auditor was Klynveld Peat Marwick Goerdeler (KPMG). KPMG gave an unqualified report for the year 2019.
GE has been on the right trajectory in terms of performance over time and has established sound accounting mechanisms and reporting. In the latest audited financial reports, it has had a truthful and fair presentation of financial transactions. (Casey & Pearce, 2018)
References
Casey, D., & Pearce, D. (Eds.). (2018). More Than Management Development: Action Learning at General Electric Company. Routledge.
Wise, G. (2020). Willis R. Whitney, General Electric and the Origins of US Industrial Research. Plunkett Lake Press.