Equity Cash Flow and Notes Analysis Term Paper

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Equity, Cash Flow, And Notes Analysis for the General Electric Company

Regarding the specific components of the Statement of Changes in Owner's Equity and Statements of Cash Flows, from line items to balances

General Electric still stands tall in the public's estimation and in its international reputation as a pioneer of Six Sigma management policies regarding internal quality control. (Six Sigma, 2004) According to its annual report, GE Share owners' equity increased $8.9 billion, $4.3 billion and $7.9 billion in 2002, 2001 and 2000. Thus, the performance of the General Electric company in sheer dollar terms continues to improve, not simply as a statistical blip between the current financial year and the financial year of the past, but steadily, and over time. The increases were largely attributable to net earnings of $14.1 billion, $13.7 billion and $12.7 billion. These increases were only partially offset by dividends declared of $7.3 billion, $6.6 billion and $5.6 billion in 2002, 2001 and 2000, respectively.

But by and large, GE's profit as a company thus overall increased in terms of its net worth, and also in terms of its ability to pay dividends to its stockholders and shareholders. It was also able to maintain generous stock options packages and retirement packages to its employees, domestically and internationally, and increased its net worth in both its manufacturing and service sectors.

Part B: Analysis of the changes in those balances from the prior year, possible specific explanations for any changes from the previous year, and how management can use that information in helping the business to achieve its http://www.ge.com/images/en/ar2002/space.gif It should be noted that GE's international financial statements were affected by currency translation adjustments.

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These translations increased the recorded equity by $1.0 billion in 2002, compared with reductions of $0.6 billion and $1.2 billion in 2001 and 2000, respectively. "Changes in the currency translation adjustment reflect the effects of changes in currency exchange rates on our net investment in non-U.S. subsidiaries that have functional currencies other than the U.S. dollar," stated the GE Management Statement and Analysis regarding Cash Flow and Liquidity of the company. Thus, in addition to specific corporate policies, the currency exchange rate also affected the reporting of the company's profits to a considerable degree, because of GE's considerable international interests.

Also because the Euro, the prime currency of the European Union, has grown stronger in relation to the United States dollar and that given the European Union has grown more cohesive and larger as an economic unity, and the unified currency has become part and parcel of international economic affairs, GE must keep a careful eye upon currency values. Currency translation and cash flow of GE was also affected "to a lesser extent," by the value of Asian currencies in relation to the U.S. dollar reversed trends in those exchange relationships over the prior two years.

The fact that the Euro strengthened significantly vs. The U.S. dollar in 2002, and was relatively unchanged in 2001 after weakening in 2000 and that Asian currencies also strengthened against the dollar in 2002, and had weakened in 2001 and 2000 point to a possible currency trend might indicate that GE needs to exploit these opportunities in the future, by exporting American manufactured and based goods to these.....

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