I.

Background of the company and the economy during your analysis period

1. Background of the company

Founding and Early Years

General Electric was officially formed on April 15, 1892, through the merger of two
companies: Edison General Electric Company of Schenectady, New York, and Thomson-
Houston Electric Company of Lynn, Massachusetts. This merger was facilitated by the
financial firm Drexel, Morgan & Co. The new entity, General Electric, was incorporated in
New York and quickly became a dominant force in the burgeoning electrical industry.

Industrial Innovations

In 1900, GE established the first industrial research laboratory in the United States, signifying
its commitment to innovation. This lab, located in Schenectady, New York, would go on to be
the birthplace of numerous technological advancements. GE’s early contributions to the
electrical industry included the development of the first practical light bulb, advancements in
electrical generation, and the creation of household appliances that would become ubiquitous
in the 20th century.

Expansion and Diversification

Throughout the 20th century, GE diversified its portfolio to include a variety of industries. It
played a significant role in the development of aviation technology, healthcare equipment, and
power generation systems. GE’s products and services began to span across multiple sectors,
including transportation, power, devices, and environmental solutions.

Portfolio and Products

General Electric's innovations cover a broad range of technological and industrial fields,
including:

Hydroelectric power. GE manufactures digital hydro plants, large hydro turbines, large hydro
generators, hydro control systems, and hydromechanical equipment.

1
Gas power. GE's gas power solutions include gas and steam turbines, generators, condensers,
and various plant equipment.

Energy grids. The company's solutions include a wide range of grid equipment and services.

Wind power. GE provides a variety of products and services, including onshore and offshore
wind turbines, as well as associated equipment and services.

Aviation. Turboprop engines, jet engines, and systems for commercial, business, and military
aviation are among the products offered.

Industrial internet. GE's industrial Internet initiative focuses on solutions for the Industrial
Internet of Things (IIoT), which essentially On an industrial scale, machine-to-machine
communications are used to monitor, collect, exchange, and analyze data in order to improve
decision speed, accuracy, and overall efficiency.

Healthcare technology. For more than a century, GE has led the way in medical technology
R&D and manufacturing, helping to advance X-ray machines, CT scans, and MRIs.

Material science. GE's materials initiatives include research and development in materials
science, chemistry, physics, and various engineering fields. The goal is to create material and
process solutions for industrial applications and government initiatives. These initiatives
include material development, processing, testing, system design, and modeling.

GE's product and service portfolio demonstrates the company's extensive R&D initiatives as
well as legacy operations. GE is also involved in financial services, offering financial
investments in energy infrastructure projects across the globe.

Financial Challenges and Restructuring

The 2010s brought financial challenges for GE, leading to the divestiture of several of its
business units, including media, financial services, and consumer products. These strategic
moves were part of a larger effort to streamline the company and focus on its core industrial
businesses.

Legacy and Future

GE’s legacy is one of perpetual innovation and adaptation. From Thomas Edison’s light bulb
to modern jet engines and renewable energy technologies, GE has consistently been at the
2
forefront of industrial progress. As the company moves forward, it continues to embody a
spirit of reinvention, aiming to address the needs of a changing world and contribute to a
brighter future.

SWOT Analysis

Strengths: Strong brand reputation, diverse industrial portfolio, and significant investments in
R&D. GE operates across multiple sectors, including aviation, renewable energy, healthcare,
and power, which helps mitigate risks associated with market fluctuations.

Weaknesses: High levels of debt from past acquisitions and exposure to cyclical industries.

Opportunities: Growth in renewable energy markets and potential in emerging technologies

like additive manufacturing.

Threats: Economic downturns affecting industrial demand and competitive pressures in key
segments

2. The economy from 2019 to 2023

2.1. United States Economy (2019-2023)

2019: Pre-Pandemic Stability and Growth

2019 saw a continuation of the growth from previous years, with a stable job market and
consumer confidence. However, trade tensions, particularly with China, began to create
uncertainty.

2020: Pandemic Induced Recession

The COVID-19 pandemic in 2020 led to an abrupt halt in economic activity. The US GDP
experienced a historic decline, particularly in Q2, as lockdowns and restrictions were
implemented nationwide.

The CARES Act and other fiscal stimulus measures were introduced to mitigate the economic
fallout, providing relief to businesses and individuals.

3
2021: Recovery and Inflation

2021 marked a year of recovery, fueled by widespread vaccination campaigns and additional
stimulus packages like the American Rescue Plan.

The economy rebounded with strong consumer spending and a recovering job market, but
supply chain disruptions began to cause inflationary pressures.

2022:Inflation and Policy Responses

In 2022, the US faced rising inflation, leading the Federal Reserve to implement a series of
interest rate hikes in an attempt to cool the economy and stabilize prices.

The Inflation Reduction Act was passed, aiming to address long-term inflationary pressures
by investing in energy and healthcare.

2023: Resilience and Growth

Despite fears of a recession, the US economy showed resilience in 2023. Consumer spending
remained robust, and the manufacturing sector saw a revival in investment.

The GDP growth rate for 2023 was reported at 3.2% in Q4, reflecting increases in consumer
spending, exports, and state and local government spending.

2.2. Economic Trends and GE’s Response

2019: Trade Tensions

Trade Tensions: The US-China trade war created uncertainty in global markets, affecting GE’s
supply chains and international sales. GE had to navigate these challenges by diversifying its
supply chain and exploring new markets.

2020: COVID-19 Pandemic

Pandemic Impact: The pandemic led to a decrease in demand for GE’s aviation products due
to a halt in global travel. However, GE’s healthcare segment saw an increase in demand for
ventilators and medical imaging devices.

4
Financial Numbers: Despite the challenges, GE’s revenue for 2020 was $79.62 billion, a
decrease from the previous year, reflecting the pandemic’s impact on its aviation and power
segments.

2021: Recovery and Growth

Recovery: As the economy began to recover, GE’s aviation segment started to see a
resurgence in orders. The company’s focus on renewable energy aligned with global trends
towards sustainability.

Revenue Growth: GE’s annual revenue for 2021 was $74.2 billion, indicating a recovery
trajectory as the world adjusted to the new normal.

2022: Inflation and Supply Chain Issues

Inflation: Rising inflation affected GE’s operational costs. The company responded by
implementing cost-saving measures and increasing the efficiency of its operations.

Revenue Numbers: GE’s annual revenue for 2022 was $58.1 billion, a slight increase from the
previous year, despite the challenges posed by inflation and supply chain disruptions.

2023: Strategic Restructuring

Restructuring: GE announced the spin-off of its healthcare business and plans to separate into
GE Aerospace and GE Vernova, focusing on aviation and energy, respectively.

Financial Performance: GE’s revenue for 2023 was $67.954 billion, a significant increase
from the previous year, indicating the success of its strategic decisions.

Profitability: The gross profit for 2023 was reported at $17.562 billion, reflecting improved
profitability and cost management

II. How GE Managed Cash During the 2019 - 2023 Period

1. Balance sheet analysis

5
A company's balance sheet offers a snapshot of its financial health at a specific point in time.
It breaks down everything a company owns (assets) and owes (liabilities) along with the
remaining equity owned by shareholders. This information is crucial for understanding a
company's financial stability and its ability to generate future profits.

In this analysis, we'll delve into General Electric's (GE) balance sheet for the period 2019 -
2023. We'll explore how GE's assets, liabilities, and shareholder equity have fared over these
years, providing insights into the company's overall cash management through the uses and
sources of cash.

- Period 2019-2020:

Table 1: General Electric’s Balance sheet 2019 – 2020

Uses of Cash Sources of Cash

2020 2019
$ million % $ million %

ASSETS

Cash, cash equivalents and

36,630 36,394 236 0.52
restricted cash

Investment securities 7,319 9,888 2,569 5.69

Current receivables 16,691 16,769 78 0.17

Financing receivables, net 1,265 1,077 188 0.42

Inventories, including deferred

15,890 14,104 1,786 3.95
inventory costs

Other GE Capital receivables 3,331 2,635 696 1.54

Current contract assets 5,764 — 5,764 12.76

All other current assets 1,522 — 1,522 3.37

Assets of businesses held for sale — 9,149 9,149 20.25

Current assets 88,412 90,016

Investment securities 42,549 38,632 3,917 8.67

Financing receivables, net 1,771 2,057 286 0.63

6
Other GE Capital receivables 4,661 4,509 152 0.34

Property, plant and equipment 41,675 43,290 1,615 3.58

ROU operating lease assets 2,987 2,896 91 0.20

Goodwill 25,524 26,734 1,210 2.68

Other intangible assets, net 9,774 10,653 879 1.95

Contract and other deferred assets 5,888 16,801 10,913 24.16

All other assets 14,598 16,462 1,864 4.13

Deferred income taxes 12,081 9,889 2,192 4.85

Assets of discontinued operations 3,532 4,109 577 1.28

Non-current assets 165,040 176,032

Total assets 253,452 266,048

LIABILITIES & STOCKHOLDERS’ EQUITY

Short-term borrowings 4,778 23,727 18,949 41.95

Accounts payable and equipment

16,476 15,926 550 1.22
project payables

Progress collections and deferred

18,215 20,508 2,293 5.08
income

All other current liabilities 16,600 15,753 847 1.88

Liabilities of businesses held for

— 1,658 1,658 3.67
sale

Current liabilities 56,069 77,572

Deferred income 1,801 — 1,801 3.99

Long-term borrowings 70,288 67,155 3,133 6.94

Insurance liabilities and annuity

42,191 39,826 2,365 5.24
benefits

Non-current compensation and

29,752 31,687 1,935 4.28
benefits

All other liabilities 16,077 19,744 3,667 8.12

7
Liabilities of discontinued
200 203 3 0.01
operations

Non-current liabilities 160,309 158,615

Total liabilities 216,378 236,187

Preferred stock 6 6 — —

Common stock 702 702 — —

Accumulated other
comprehensive income (loss), net (9,749) (11,732) 1,983 4.39
attributable to GE

Other capital 34,307 34,405 98 0.22

Retained earnings 92,247 87,732 4,515 10.00

Common stock held in treasury (81,961) (82,797) 836 1.85

Total GE shareholders’ equity 35,552 28,316

Noncontrolling interests 1,521 1,545 24 0.05

Total equity 37,073 29,861

Total liabilities and equity 253,451 266,048 45,171 100 45,170 100

- Period 2020-2021:

Table 2: General Electric’s Balance sheet in 2020 – 2021

Uses of Cash Sources of Cash

2021 2020
$ million % $ million %

ASSETS

Cash, cash equivalents and

15,770 36,630 20,860 26.49
restricted cash

Investment securities 12,297 7,319 4,978 6.32

Current receivables 15,620 16,691 1,071 1.36

8
Financing receivables, net — 1,265 1,265 1.61

Inventories, including deferred

15,847 15,890 43 0.05
inventory costs

4.23
Other GE Capital receivables — 3,331 3,331

Current contract assets 4,881 5,764 883 1.12

All other current assets 1,933 1,522 411 0.52

Assets of businesses held for sale — —

Current assets 66,348 88,412

Investment securities 42,209 42,549 340 0.43

Financing receivables, net — 1,771 1,771 2.25

Other GE Capital receivables — 4,661 4,661 5.92

Property, plant and equipment 13,003 41,675 28,672 36.40

ROU operating lease assets 2,606 2,987 381 0.48

Goodwill 26,182 25,524 658 0.84

Other intangible assets, net 9,330 9,774 444 0.56

Contract and other deferred assets 6,124 5,888 236 0.30

All other assets 19,040 14,598 4,442 5.64

Deferred income taxes 10,855 12,081 1,226 1.56

Assets of discontinued operations 3,177 3,532 355 0.45

165,04
Non-current assets 132,526
0

253,45
Total assets 198,874
2

9
 LIABILITIES & STOCKHOLDERS’ EQUITY

Short-term borrowings 4,361 4,778 417 0.53

Accounts payable and equipment

16,243 16,476 233 0.30
project payables

Progress collections and deferred

17,372 18,215 843 1.07
income

All other current liabilities 13,977 16,600 2,623 3.33

Liabilities of businesses held for

— —
sale

Current liabilities 51,953 56,069

Deferred income 1,989 1,801 188 0.24

Long-term borrowings 30,824 70,288 39,464 50.11

Insurance liabilities and annuity

37,166 42,191 5,025 6.38
benefits

Non-current compensation and

21,202 29,752 8,550 10.86
benefits

All other liabilities 13,241 16,077 2,836 3.60

Liabilities of discontinued
887 200 687 0.87
operations

160,30
Non-current liabilities 105,309
9

216,37
Total liabilities 157,262
8

Preferred stock 6 6

Common stock 15 702 687 0.87

10
Accumulated other
comprehensive income (loss), net 1,582 (9,749) 11,331 14.39
attributable to GE

Other capital 34,691 34,307 384 0.49

Retained earnings 85,109 92,247 7,138 9.06

(81,961
Common stock held in treasury (81,093) 868 1.10
)

Total GE shareholders’ equity 40,310 35,552

Noncontrolling interests 1,302 1,521 219 0.28

Total equity 41,612 37,073

253,45
Total liabilities and equity 198,874 78,760 100 78,760 100
1

- Period 2021-2022:

Table 3: GE’s Balance sheet in 2021 – 2022

Uses of Cash Sources of Cash

2022 2021 $ $
% %
million million

ASSETS

Cash, cash equivalents and

17,262 15,770 1,492 6.07
restricted cash

Investment securities 7,609 12,297 4,688 19.07

Current receivables 17,976 15,620 2,356 9.59

Financing receivables, net — —

11
Inventories, including deferred
17,403 15,847 1,556 6.33
inventory costs

Other GE Capital receivables — —

Current contract assets 3,088 4,881 1,793 7.29

All other current assets 1,522 1,933 411 1.67

Assets of businesses held for sale 1,374 — 1,374 5.59

Current assets 66,234 66,348

Investment securities 36,048 42,209 6,161 25.07

Financing receivables, net — —

Other GE Capital receivables — —

Property, plant and equipment 12,341 13,003 662 2.69

ROU operating lease assets 2,137 2,606 469 1.91

Goodwill 25,798 26,182 384 1.56

Other intangible assets, net 7,625 9,330 1,705 6.94

Contract and other deferred assets 6,010 6,124 114 0.46

All other assets 16,998 19,040 2,042 8.31

Deferred income taxes 11,705 10,855 850 3.46

Assets of discontinued operations 2,892 3,177 285 1.16

Non-current assets 121,554 132,526

Total assets 187,788 198,874

LIABILITIES & STOCKHOLDERS’ EQUITY

Short-term borrowings 3,757 4,361 604 2.46

Accounts payable and equipment 18,644 16,243 2,401 9.77

12
project payables

Progress collections and deferred

18,118 17,372 746 3.04
income

All other current liabilities 14,484 13,977 507 2.06

Liabilities of businesses held for

1,944 — 1,944 7.91
sale

Current liabilities 56,947 51,953

Deferred income 2,006 1,989 17 0.07

Long-term borrowings 28,593 30,824 2,231 9.08

Insurance liabilities and annuity

33,347 37,166 3,819 15.54
benefits

Non-current compensation and

16,021 21,202 5,181 21.08
benefits

All other liabilities 12,155 13,241 1,086 4.42

Liabilities of discontinued
1,137 887 250 1.02
operations

Non-current liabilities 93,259 105,309

Total liabilities 150,206 157,262

Preferred stock 6 6

Common stock 15 15

Accumulated other
comprehensive income (loss), net (1,311) 1,582 2,893 11.77
attributable to GE

Other capital 34,173 34,691 518 2.11

Retained earnings 84,692 85,109 417 1.70

13
 (81,093
Common stock held in treasury (81,209) 116 0.47
)

Total GE shareholders’ equity 36,366 40,310

Noncontrolling interests 1,216 1,302 86 0.35

Total equity 37,582 41,612

Total liabilities and equity 187,788 198,874 24,579 100 24,579 100

- Period 2022-2023:

Table 4: General Electric’s Balance sheet in 2022 – 2023

Uses of Cash Sources of Cash

2023 2022
$ million % $ million %

ASSETS

Cash, cash equivalents and

16,967 17,262 295 0.77
restricted cash

Investment securities 5,706 7,609 1,903 4.96

Current receivables 15,466 17,976 2,510 6.54

Financing receivables, net — —

Inventories, including deferred

16,528 17,403 875 2.28
inventory costs

Other GE Capital receivables — —

Current contract assets 1,500 3,088 1,588 4.14

All other current assets 1,647 1,522 125 0.33

Assets of businesses held for sale 1,985 1,374 611 1.59

Current assets 59,799 66,234

Investment securities 38,000 36,048 1,952 5.08

14
Financing receivables, net — —

Other GE Capital receivables — —

Property, plant and equipment 10,654 12,341 1,687 4.39

ROU operating lease assets 1,840 2,137 297 0.77

Goodwill 13,385 25,798 12,413 32.33

Other intangible assets, net 5,695 7,625 1,930 5.03

Contract and other deferred

5,406 6,010 604 1.57
assets

All other assets 15,996 16,998 1,002 2.61

Deferred income taxes 10,575 11,705 1,130 2.94

Assets of discontinued
1,695 2,892 1,197 3.12
operations

Non-current assets 103,246 121,554

Total assets 163,045 187,788

LIABILITIES & STOCKHOLDERS’ EQUITY

Short-term borrowings 1,253 3,757 2,504 6.52

Accounts payable and equipment

15,408 18,644 3,236 8.43
project payables

Progress collections and deferred

19,677 18,118 1,559 4.06
income

All other current liabilities 12,712 14,484 1,772 4.62

Liabilities of businesses held for

1,826 1,944 118 0.31
sale

Current liabilities 50,876 56,947

Deferred income 1,339 2,006 667 1.74

Long-term borrowings 19,711 28,593 8,882 23.14

Insurance liabilities and annuity

39,624 33,347 6,277 16.35
benefits

15
Non-current compensation and
11,214 16,021 4,807 12.52
benefits

All other liabilities 10,509 12,155 1,646 4.29

Liabilities of discontinued
1,193 1,137 56 0.15
operations

Non-current liabilities 83,590 93,259

Total liabilities 134,466 150,206

Preferred stock — 6 6 0.02

Common stock 15 15

Accumulated other
comprehensive income (loss), (6,150) (1,311) 4,839 12.60
net attributable to GE

Other capital 26,962 34,173 7,211 18.78

Retained earnings 86,527 84,692 1,835 4.78

Common stock held in treasury (79,976) (81,209) 1,233 3.21

Total GE shareholders’ equity 27,378 36,366

Noncontrolling interests 1,201 1,216 15 0.04

Total equity 28,579 37,582

Total liabilities and equity 163,045 187,788 38,391 100 38,391 100

- 2019 - 2020:
Uses of Cash: The highest proportion of use-of-cash was short-term borrowings, which
accounted for 41.95%. This suggests that GE used most of its cash to repay money that is
owed within a relatively short period, typically less than a year or up to 18 months at most.
They are prioritized to address temporary needs of the company such as covering unexpected
expenses, managing cash flow gaps, or funding short-term projects during this time.

Sources of Cash: Contract and other deferred assets represented the highest source of cash at
24.16%, followed by Assets of businesses held for sale at 20.25%. These contracts,
representing prepayments received from customers for undelivered products, provided GE
with a significant source of cash. During this period, GE acknowledged it had a debt problem
16
and needed additional cash. This is why the company decided to sell its BioPharma business
to Danaher for $21 billion to improve their financial situation by paying down debt and
steadying its business. This turned out to be a wise decision because the pandemic hit shortly
after the company divestiture, and having that extra cash helped GE deal with the difficult
economic period.

- 2020 - 2021:
Uses of Cash: Long-term borrowings were the primary use of cash, accounting for 50.11%. It
decreased significantly because of the debt repurchases GE had made. The company used
$32.6 billion to buy back some of its existing debt, along with making regular repayments as
loans matured. Investors might view this as a negative sign, suggesting GE limited its growth
potential by prioritizing debt reduction. However, GE has explained that its discontinued
operations lowered interest expense due to having less debt (less debt, less interest). This is
further addressed in the Sources of Cash.

Sources of Cash: Property, plant, and equipment was the primary source of cash, accounting
for 36.40%. This resulted from GE's sale of GE Capital Aviation Services (GECAS) to
AerCap Holdings in 2021. GECAS owns aircraft, which is classified as PPE because they are
tangible assets used in the business over a long period. This transaction significantly
improved GE's financial position as it allowed them to reduce their total debt by more than
$50 billion over the year. While GE is now a significant shareholder in AerCap, owning 111.5
million shares of common stock (around 46% ownership interest), the sale classified GECAS
as a discontinued operation, hence the term appearing in the balance sheet.

- 2021 - 2022:
Uses of Cash: The highest proportion of use-of-cash was non-current compensation and
benefits, at 21.08%, indicating a high burden of legacy costs or a less focus on cash flow
generation.

Sources of Cash: The highest proportion of source-of-cash was investment securities in both
long term assets and current assets at 25.07% & 19.07%, respectively. While GE generally
intends to hold these securities until maturity, they can be sold for various reasons like
portfolio diversification, changes in credit quality, or cash flow needs during this period.

17
This was the time when the pandemic was rough. As can be seen, the uses/sources of cash
decreased significantly from $78 billion to $24 billion because GE was keen on prioritizing
building cash reserves to weather potential financial disruptions.

2. Leverage ratio

Leverage ratio (Total Debts/Total Assets) helps assess a company's financial health through
the total debt proportion in the total assets the company owns. Analyzing this ratio helps
identify the company’s strategy of how it manages cash in a specific time given. In this case,
the debt-to-asset ratio of General Electric is compared with that of major competitors and the
industry benchmark.
Table 5: Leverage ratio of GE, Boeing, Honeywell and average industrial industry 2019-
2023

2019 2020 2021 2022 2023

GE 0.89 0.85 0.79 0.80 0.82

Boeing 1.06 1.12 1.11 1.12 1.13

Honeywell 0.68 0.72 0.70 0.72 0.73

Industrial 1.53 1.58 1.94 1.77 1.68

The table suggests that GE's debt-to-asset ratio is within a reasonable range compared to its
competitors, fluctuating between 0.79 and 0.89 over the 5-year-period. Notably, during the
Covid-19 pandemic, GE’s leverage ratio had a downward trend (2020 - 2021). GE likely
reduced debt strategically to strengthen its finances during economic hardship, aiming for
better flexibility. In contrast, the average industrial company's leverage ratio increased
significantly from 1.53 in 2019 to 1.94 in 2021, suggesting many companies increased debt
financing during Covid-19.

3. Cash Flow Statement Analysis

The cash flow statement is an important tool for investors and analysts to evaluate a
company's liquidity, solvency, and overall financial health. By examining the cash flow
statement, stakeholders can get a sense of how much cash a company is generating or using
and how it's being used
18
 3.1. Operating Cash Flow
Table 6: Operating Cash Flow in 2019 – 2023

2019 2020 2021 2022 2023

Net earnings (loss) -4,912 5,546 -6,591 407 9,443

(Earnings) loss from discontinued

5,335 125 3,195 644 (414)
operations activities

Depreciation and amortization of

4,026 4,636 1,871 1,802 1,473
property, plant and equipment

Amortization of intangible assets 1,569 1,382 1,138 -1,742 606

Goodwill impairments 1,486 1,717 - - -

(Gains) losses on purchases and sales

(53) (12,526) 40 (66) (104)
of business interests

(Gains) losses on retained and sold

ownership interests and other equity (693) 2,105 (1,656) 144 (5,842)
securities

Debt extinguishment costs - - 6,524 465 -

Principal pension plans cost 3,878 3,559 2,650 575 (1,108)

Principal pension plans employer

(298) (2,806) (326) (325) (212)
contributions

Other postretirement benefit plans, net (1,228) (893) (1,144) (1,160) (644)

Provision (benefit) for income taxes 726 (474) (286) 476 1,162

Cash paid during the year for income

(1,950) (1,441) (1,165) (1,127) (1,148)
taxes

19
 2019 2020 2021 2022 2023

Net earnings (loss) -4,912 5,546 -6,591 407 9,443

Changes in operating working capital 664 626 (902) 1,396 1,638

Financial services derivatives net

- - (1,143) (154) 3
collateral/settlement

All other operating activities 1,869 2,041 (1,317) 1,160 717

Adjustments to reconcile net earnings

9,996 (2,074) 4,284 4,928 (3,459)
(loss) to cash from operating activities

Cash from operating activities 10,419 3,597 888 5,864 5,570

Fiscal year is January-December. All values USD Millions.

GE's operating cash flow has been quite volatile over the past five years, with significant
fluctuations between positive and negative figures. Despite the volatility, there seems to be a
positive trend emerging in the last two years (2022 & 2023) with positive and growing
operating cash flow, suggesting potential stabilization and improvement in the company's
financial health.

The significant fluctuations in net earnings (loss) directly impact operating cash flow. The
large losses in 2019 and 2021 are particularly concerning, while the substantial profit in 2023
is encouraging. The company experienced a significant net earnings loss of $6,591 in 2020
compared to a profit in 2019. Changes in working capital, particularly inventories and
accounts payable, have significantly influenced cash flow. It's important to consider the
economic context of 2020, which saw the onset of the COVID-19 pandemic. This could have
impacted GE's operations and financial performance.

The most prominent factor is the significant jump in net earnings from a loss of $6,591
million in 2021 to a profit of $9,443 million in 2023. This turnaround likely played a major
role in boosting operating cash flow.
20
The significant rise of $2.793 billion in Accounts Payable and Equipment Project Payables in
2022 suggests that GE might have delayed payments to suppliers and for equipment projects.
This effectively increases available cash in the short term.

Increase in Progress Collections and Current Deferred Income: The growth of $2.933 billion
indicates that GE might have collected more on projects in progress or received advance
payments for future services. This directly contributes to higher cash inflow in 2022 and the
decreasing in Inventories.

Working Capital Management: The positive impact of working capital changes in recent years
suggests improved efficiency in managing inventories and payables.

Overall, while GE's operating cash flow has been volatile, the recent positive trend offers
some optimism. However, the company still faces challenges and needs to focus on achieving
sustainable profitability and managing its financial obligations effectively to ensure long-term
success.
3.2. Investing Cash Flow
Table 7: Investing Cash Flow in 2019 – 2023

2019 2020 2021 2022 2023

Additions to property, plant and

(6,095) (3,403) (1,361) (1,484) (1,595)
equipment and internal-use software

Dispositions of property, plant and

3,718 1,644 167 209 89
equipment

Net (increase) decrease in GE

1,117 (20) - - -
Capital financing receivables

Proceeds from sale of discontinued

5,864 - 22,356 - -
operations

Proceeds from principal business

4,683 20,596 1 15 -
dispositions

Net payments for principal

(68) (85) (1,550) (30) (365)
businesses purchased

21
 Dispositions of retained ownership
3,383 417 4,145 4,717 9,004
interests

Net purchases of insurance

(1,616) (1,352) (1,290) (876) (986)
investment securities

All other investing activities (302) (1,019) 1,237 (726) 791

Cash from investing activities 10,684 16,778 23,705 1,825 6,938

Unit: Million USD

The provided data paints a complex picture of GE's investing activities over the past five
years.

GE's investment in property, plant, and equipment (PP&E) including software has fluctuated
significantly. While there was a decrease from 2019 to 2021, there was a substantial increase
in 2023. This could indicate strategic shifts, divestitures, or varying business needs.

The provided data shows a significant decrease in General Electric Co.'s (GE) cash from
investing activities between 2021 and 2023.

A substantial drop is observed in 2022 due to the absence of significant proceeds from
principal business dispositions, compared to $22,356 million in 2021. This suggests a
strategic shift away from divestments or a lack of suitable opportunities.

To sum up, the decrease in GE's cash from investing activities is primarily driven by reduced
proceeds from business dispositions and increased investments in PP&E.

3.3. Financing Cash Flow

Table 8: Financing Cash Flow in 2019 – 2022

2019 2020 2021 2022 2023

Net increase (decrease) in

borrowings, maturities of 90 days 280 (4,168) (710) 65 (55)
or less

22
 Newly issued debt, maturities
2,185 15,028 364 8,205 11
longer than 90 days

Repayments and other debt

reductions, maturities longer than (16,567) (29,876) (36,521) (11,205) (3,360)
90 days

Dividends paid to shareholders (649) (648) (575) (639) (589)

Cash received (paid) for debt

- - (7,196) 338 -
extinguishment costs

Redemption of GE preferred
- - - - (5,795)
stock

Purchases of GE common stock

- - (107) (1,048) (1,233)
for treasury

All other financing activities (1,013) (189) (551) (1,301) 409

Cash used for financing

(15,764) (19,853) (45,296) (5,585) (10,612)
activities

Unit: Million USD

GE's financing cash flow data reveals a complex picture of debt management, shareholder
returns, and strategic financial decisions.
Significant Debt Activity: GE has been actively managing its debt, with fluctuations in both
short-term and long-term borrowings. While there were periods of increased borrowing, the
overall trend seems to be towards debt reduction, especially in the later years.
There is a dramatic decrease in cash used for financing activities in 2021. A substantial
outflow of $36,521 indicates a focused effort on reducing long-term debt obligations and
Redemption of GE preferred stock: $7,196 leading to a decrease in 2021. Dividends paid to
shareholders: $29,876 demonstrates a commitment to returning value to shareholders despite
the decrease in overall cash from financing activities.
Negative Cash Flow: The financing activities resulted in a net cash outflow for most of the
period, implying that GE was using more cash for financing activities than it was generating.

23
While the commitment to dividends is commendable, the negative cash flow from financing
activities raises concerns about the long-term sustainability of these payouts.

4. Conclusion:
GE's cash management strategy over the past five years reflects a focus on stability and
adapting to its financial health. The company utilized various strategies, primarily relying on
Assets for sources of cash and Liabilities for uses of cash. Notably, according to the cash flow
statement, GE aimed to cover financing activities (often a cash outflow) with inflows from
operations and investments. This conservative approach prioritized financial stability over
potentially high-reward but risky ventures. Overall, GE's cash management strategy has
demonstrably aimed to improve the company's financial health through measured actions.

III. Inventory Management Analysis

1. Introduction to Inventory Management

Inventory Management, also called Inventory control, is a company’s efforts to comprehend

the minimal cost and levels of inventory held in which they can still meet demand. Many
balancing acts must be constantly addressed and monitored within inventory management.
The main objectives of inventory management are to strike a balance between cost efficiency
and customer satisfaction. This involves minimizing the financial burden of holding inventory
by reducing storage costs, preventing waste, and optimizing order quantities. At the same
time, it aims to ensure customer satisfaction by preventing stockouts, fulfilling orders
accurately and promptly, and guaranteeing product availability.

The following part of the report examines the strategies and methods General Electric has
used for its inventory, as well as their inventory management performance, the challenges the
company is facing and their solutions to address the problems from 2019 to 2023.

1.1. Types of inventory

General Electric has three types of inventory, which are:
Raw Materials: The fundamental parts of the manufacturing process that go into
making power products, renewable energy sources, and aeroplane engines are called raw
materials. For General Electric, raw materials may include natural gas, fossil, oil, diesel and
nuclear to produce electric power; additive materials (including metal powders),...
24
 Work-in-Progress (WIP): Products that are partially completed and at different
stages of the production process are included in work-in-progress inventory. WIP inventory in
the aerospace sector can consist of mechanical aircraft systems, electric power, and integrated
engine components. The work-in-progress inventory for the renewable energy industry
comprises offshore and onshore wind, battery storage, hydropower, and blades. Software that
leverages data is included in WIP inventory in the power section.

Finished Goods: Products that are ready for sale or client distribution are listed in
finished goods inventory. Steam turbines, gas turbines, grid solutions, and aviation engines
are examples of finished goods for General Electric.

1.2. Inventory management strategies and valuation method

Inventory management strategies: General Electric uses a variety of inventory management

strategies as a top producer of jet engines for both military and commercial aircraft to
efficiently manage its supply chain and satisfy consumer demand. Some of the primary
inventory management strategies used by General Electric include:

- Material Requirements Planning (MRP): MRP is a computerized ordering and

scheduling system that uses data generated from the company to project what material
will be needed in the future. The system keeps track of the parts that production is
dependent on and analyzes it to perfect the production schedules. Though MRP is not
the ideal system to keep inventory levels low (JIT production would hold this title) it
works best for GE Aviation because the production of turbine engines takes time
production must begin before demand is placed. Therefore demand must be predicted
using expertise, and past demand data.
- Inventory Turnover Analysis: Regularly analyzing how quickly inventory sells helps
General Electric identify areas for improvement. High turnover rates indicate efficient
inventory management, while low rates might suggest overstocking.
- Economic Order Quantity (EOQ) Model: This helps determine the ideal order quantity
to minimize total inventory costs. General Electric might use EOQ to balance ordering
costs with holding costs.
- Vendor Managed Inventory (VMI): To streamline its supply chain and inventory
management procedures, General Electric uses vendor-managed inventory techniques,
specifically:

25
 o Supplier Performance Metrics: Industry averages suggest General Electric
Aerospace track metrics like on-time delivery rate (OTDR) targeting a
minimum of 98%, parts per million (PPM) defect rate striving for below 100
PPM, and cost reduction targets negotiated with each supplier.
o Collaborative Relationships with Suppliers: In 2023, General Electric
Aerospace partnered with its supplier, a leading manufacturer of 3D printing
technologies, to develop a new lightweight and high-strength material for jet
engine components. This exemplifies co-creation for innovation.
o Kanban System Implementation: According to General Electric Aerospace,
they have a successful implementation of a Kanban system with a major
supplier of electrical wiring harnesses, reducing lead times by 15%.
- Advanced inventory management system with technologies in Inventory Management:
o Radio-Frequency Identification (RFID): RFID is a technology that uses
electromagnetic fields to automatically identify and track tags attached to
objects. General Electric uses RFID tags to track the location and condition of
its inventory in real time.
 In 2020, General Electric saved $100 million in inventory management
costs by using RFID. In 2023, General Electric expects to save $200
million in inventory management costs by using RFID.
 This helps General Electric to improve inventory accuracy, reduce
stockouts, and optimize inventory levels.
o Artificial Intelligence (AI): General Electric uses artificial intelligence to
predict customer demand, optimize inventory levels; analyze historical sales
data, customer behavior, and other factors to predict future demand.
 In 2021, General Electric reduced obsolete inventory by 15% by using
AI. In 2023, GE expects to reduce obsolete inventory by 30% by using
AI.
 This helps General Electric to ensure that it has the right amount of
inventory on hand to meet customer demand.
o Blockchain: Blockchain is a distributed ledger technology that can be used to
track the movement of goods and materials. General Electric uses blockchain
to enhance traceability and reduce fraud.

26
  In 2022, General Electric reduced fraud costs by 5% by using
blockchain. In 2023, General Electric expects to reduce fraud costs by
10% by using blockchain.
 It helps General Electric to ensure that its products are authentic and
that they have not been tampered with. Therefore, they could minimize
obsolescence and fraud risks.
Valuation method: General Electric employs the perpetual FIFO valuation technique as one
strategy for managing its inventory. A "first-in, first-out" inventory management strategy is
used by General Electric to guarantee appropriate product chain allocation. In other words, the
first products bought are the ones that are sold first. This approach has the benefit of lowering
the possibility of products becoming out-of-date or obsolete. General Electric must employ
this resource measure while managing its inventory since it produces jet engines, power
production turbines, and medical imaging equipment, all of which have variable lifespans by
nature.

2. Measures of inventory management performance

2.1. Inventory size

Table 9: Inventory Size of General Electric for a 5-year period (2019-2023)

Year 2019 2020 2021 2022 2023

Inventory 15,890 15,847 17,403 16,528

14,104
($ million) (+12.66%) (-0.27%) (+9.81%) (-5.03%)

Average inventory 14,997 15,869 16,625 16,966

13,954
($ million) (+7.47%) (+5.81%) (+4.76%) (+2.05%)

COGS 60,421 53,896 55,535 50,392

66,911
($ million) (-9.7%) (-10.8%) (+3.04%) (-9.26%)

Formula: Average inventory = (Beginning inventory of period + Inventory at end of

period)/2

Based on the table shown, the amount of General Electric's inventory has fluctuated
over the past five years (2019-2023). The data shows a considerable increase from $14.104
million in 2019 to reached a peak of $17.403 million in 2022, which is a total growth of over

27
23%. Nevertheless, there were minor decline in 2021 and in 2023, 0.27 and 5.03 percent
respectively.

General Electric's inventory grew significantly from 2019 to 2022. This rise could be
due to several factors. In 2020, there was a high demand for energy and healthcare products
and supply chain disruptions due to the Covid-19 pandemic, which compelled General
Electric to raise its inventory levels to meet the demand. In 2022, General Electric maintains
its focus on the energy and healthcare sectors, which hold higher inventory values compared
to other segments. The economic rebound following the Covid-19 pandemic might also has
driven up demand for General Electric's products, specifically for the Health segment’s
products.

The size of the inventory is increasing, which could be a sign of rising sales or
production, but in this case, it raises questions about the company’s possible excessive
stocking or inadequate handling of inventories as the cost of goods sold kept plummeting over
the period.

COGS analyzes the cost of the parts and materials that the business needs to make its
products. It has suprisingly decreased over the five years, from $66,911 million in 2019 to
$50,392 million in 2023. This decrease might not necessarily be proportional to the inventory
growth but it suggests several possibilities:

- Demand Fluctuations: A decline in overall demand for the company's products

could be a factor of inventory growth. If production remained constant while sales
fell, excess inventory would accumulate.
- Supply Chain Disruptions: Difficulties in obtaining raw materials due to global
supply chain issues could be another reason. The company might be holding more
inventory to avoid production stoppages, even if demand isn't booming, especially
in the Covid-19 pandemic. This could explain a rise in COGS due to potentially
higher material costs.
- Shifting Production Strategy: The company could be building more inventory in
anticipation of future demand growth. However, the inventory trend suggests
ongoing production, so this might be a combined strategy.

2.2. Analysis of inventory management using ratios

Table 10: Inventory ratios of General Electric from 2019 to 2023

28
 Year 2019 2020 2021 2022 2023

Inventory turnover 4.03 3.40 3.34 2.97

4.80
(-16.04%) (-15.63%) (-1.76%) (-11.08%)

Inventory
91 107 109 123
conversion period 76
(+19.74%) (+17.58%) (+1.87%) (+12.84%)
(Days)

Formula:
Inventory turnover ratio = Cost of good sold/Average Inventory in Period
Inventory conversion period = 365/Inventory turnover ratio

Inventory turnover ratio:

Inventory turnover is calculated by dividing the cost of goods sold by the average
inventory value. It measures how quickly a company sells its inventory. A higher inventory
turnover indicates that a company is selling its inventory more quickly, which can lead to
increased efficiency and profitability. Over the five-year-period, there has been a significant
downtrend in General Electric inventory turnover ratio.

In particular, in 2019, the inventory turnover was 4.8 times, indicating that General
Electric sold and replaced its inventory approximately 4.8 times during this year. Over five
years, the inventory turnover ratio decreased to 2.97 in 2023, marking a total of 38.13%
decrease, which suggests a huge slowing down of sales relative to the base year.

Inventory conversion period:

The inventory conversion period is the average number of days it takes for a company
to convert its inventory into sales. A lower inventory conversion period is generally better, as
it indicates that a company is able to sell its inventory quickly.
In 2019, the inventory conversion period was 76 days, indicating that, on average, it
took General Electric around 76 days to convert its inventory into sales. This period quickly
rocketed to 123 days in 2023, which is an 61.84% increase compared to the base year,
suggesting a huge slower inventory turnover.

29
 2.3. Comparison to competitors and energy industry

Table 11: Inventory Ratios of General Electric, Honeywell, Industrial 2019 - 2023

Year 2019 2020 2021 2022 2023 Average

Inventory ($ million)

General Electric 14,104 15,890 15,847 17,403 16,528

Honeywell Inc. 4,421 4,489 5,138 5,538 6,178

Average inventory ($ million)

General Electric 13,954 14,997 15,869 16,625 16,966

Honeywell Inc. 4,374 4,455 4,814 5,338 5,858

COGS ($ million)

General Electric
66,911 60,421 53,896 55,535 50,392

Honeywell Inc. 24,339 22,169 22,061 22,347 22,995

Inventory conversion period (Days)

General Electric 111 130 184 199 224

Honeywell Inc. 66 73 80 87 93

Inventory turnover ratio

General Electric 3.29 2.80 1.98 1.83 1.63

Honeywell Inc. 5.57 4.98 4.58 4.19 3.93

Inventory Level:
General Electric's inventory level has fluctuated somewhat over the five years. It
increased from $14.104 million in 2019 to $17,403 million in 2022, and then decreased

30
slightly to $16.528 million in 2023. Overall, General Electric's inventory level appears to be
higher than Honeywell's across the five years.
Honeywell's inventory level has also been somewhat volatile. It started at $4.421
million in 2019 and reached $6,178 million in 2022. In 2023, it was $5,858 million.
Generally, Honeywell's inventory level is lower than General Electric's throughout the period.
Inventory Turnover Ratio:
The inventory turnover ratio for General Electric has steadily decreased over the five
years, going from 3.29 in 2019 to 1.63 in 2023. General Electric's inventory turnover ratio has
declined significantly. This suggests it takes General Electric longer to sell its inventory and
convert it into cash.
Honeywell's inventory turnover ratio has also decreased slightly over the period, but to
a lesser extent than General Electric. It went from 5.57 in 2019 to 3.93 in 2023. Honeywell's
inventory turnover ratio is generally higher than General Electric's throughout the five years.
Honeywell's ratios show a less dramatic decrease, indicating a faster inventory turnover and a
shorter cash conversion cycle.
General Electric Co's inventory turnover at the year ended December 31st, 2023 of
2.97 was much lower than its peers in the diversified machinery industry group in 2019 which
was 5.64. From December 31st, 2019 to December 31st, 2023, General Electric Co's average
inventory turnover was 3.74 compared to an industry average of 6.75.

Inventory Conversion Period:

General Electric 's inventory conversion period has increased significantly over the
five years, from 111 days in 2019 to 224 days in 2023. This means the average time it takes
General Electric to convert raw materials into finished goods, sell them, and collect cash from
customers has become longer.
Honeywell's inventory conversion period has also increased slightly over the period,
from 66 days in 2019 to 93 days in 2023. However, the increase is not as dramatic as General
Electric's. Honeywell's inventory conversion period is generally lower than General Electric 's
throughout the five years, indicating a more efficient cash conversion cycle.
General Electric Co's inventory conversion period in the year ended December 31st,
2023 of 224 was lower than its peers in the industry group in 2023 of 114. From 2019 to
2023, General Electric Co's average inventory conversion period was 169.6 compared to an
industry average of 132.8.

In conclusion, General Electric generally has a higher inventory level, slower

inventory turnover rate, and longer inventory conversion period compared to Honeywell over
31
the five years analyzed. This indicates that Honeywell clearly have a more efficient inventory
management strategy compared to General Electric, based on their lower inventory levels,
faster turnover rates, and shorter conversion periods.

3. Problems summarization & Recommendation

Despite current inventory management efforts, General Electric's high inventory levels,
declining turnover ratio, and longer conversion period suggest room for improvement. To
become more efficient, General Electric could focus on just several areas. Improved demand
forecasting and segmented inventory strategies can help avoid overstocking. Strengthening
supplier relationships and exploring Just-in-Time inventory management can streamline the
supply chain. Additionally, ABC classification, safety stock adjustments, and stricter control
processes can optimize inventory levels. General Electric might also consider product
lifecycle management, outsourcing non-core activities, and investing in inventory
management software for further efficiency gains. By implementing these strategies and
closely monitoring performance, General Electric can work towards lowering inventory,
improving turnover, and achieving a more efficient inventory management system.

IV. Accounts Receivable and Accounts Payable Analysis

1. Accounts Receivable

Table 12: Account Receivable Ratios of GE

Time 2019 2020 2021 2022 2023

$16.691B $15.620B $17.976B $15.466B

Account Receivable $16.769B
(-0.465%) (-6.42%) (+15.08%) (-13.96%)

$87.487B
Sales of equipment and $73.022B $71.090B $73.602B $64.565B
services (-16.53%) (-2.65%) (+3.53%) (-12.3%)

4.36 4.4 4.38 3.86

Receivables Turnover 5.22
(-16.47%) (+0.92%) (-0.45%) (-11.87%)

Average Collection Period 70 83.7 82.9 83.3 94.56

32
 (-
(+19.57%) (+0.48%) (+13.52%)
0.956%)

Accounts receivable represent the sums owed to the company by its customers. Starting with
$16.769 billion Receivables in 2019, GE began to witness a decrease from 2020, which was
mainly the result of the Covid-19 pandemic. During this time, the revenue of the company
decreased significantly in 2020 with a loss of $14.465 billion in Sales due to the decrease in
people's travel needs (as a result of social quarantine policies of countries), leading to a
decrease in demand for aircraft equipment (specifically engine), one of the core fields of GE).
However, GE was still able to retain its Receivable amount, only declined a small amount
compared to the loss in Sales (-0.465% with -16.53%). The reason behind this might be
because GE had loosened its credit policy, allowing customers to pay later during the Covid-
19 pandemic, as an attempt to encourage their customer to pay their debt. This also explained
the meaning behind their Receivables turnover decrease and Average collection period
increase (-16.47% and +19.57%). GE had loosened its credit policy, allowing customers to
pay later during the Covid-19 pandemic as an attempt to attract more customers to use their
services and products and encourage them to more likely pay their debt

Jumping to 2021, GE's ability to collect debt has been clearly demonstrated through the
6.42% decrease in their Receivable with Sales only decreased 2.65%, as well as the rise in
Receivables Turnover (+0.92%) and decrease of A.C.P ( -0.956%).

After that GE began to recover from the pandemic in 2022 as the Sales generally rose to
$73.602 billion (+3.53%), following a 15.08% jump in Receivables, showing the return of
demand for aircraft engines, and the increase in need for power during the Russia-Ukraine
conflict was also a factor contributing to the rise of GE, as Power is also their core field. But
as the Receivable suddenly increased way more than the increase of Sales, GE’s receivables
turnover decreased 0.45% and their A.C.P increased 0.48%, implying GE was trying to
facilitate their customer through credit term in order to attract Revenue.

Unfortunately, the metric deteriorated in the subsequent year. GE’s sales in 2023 dropped to
$64.565 billion, the lowest in the last 4 years, creating correlation with other values with
Receivables and Receivables turnover all down to their bottom, $15.466 billion and 3.86
33
respectively, and A.C.P rose to the highest - taking them 94.56 day to collect their money,
showing it is taking GE longer to collect payment from customers. This could be a sign that
customers are facing financial difficulties, or that GE was loosening its credit standards,
making their sales decrease so significantly.

 Comparison with other competitors and industry.

Table 13: Account Receivable Turnover of GE, Boeing, Honewell and Energy Industry.

Time 2019 2020 2021 2022 2023

GE Co. 5.22 4.36 4.4 4.38 3.86

Boeing Co. 23.44 29.75 23.58 26.46 29.37

Honeywell Inc. 4.90 4.78 5.04 4.77 4.87

Industrials 7.67 7.42 7.59 7.79 8.16

In general, GE’s ratio tends to be under the average of the industry, but maintains stable
trends over the past 5 years. Compared with one of its main competitors in the same industry

34
Honeywell, both have an account receivable turnover under average, but Honeywell still has a
higher ratio than GE over the 4 years, showing it might be more efficient in collecting
payments.

On the other hand, Boeing demonstrated exceptional surge in during 2019 and 2020, from
23.44 to 29.75, then quickly dropped back to 23.58 in 2021, followed up with a gradual and
stably boost till 2023. Having a much higher ratio than GE, Boeing might have a better credit
term and more credit-quality customer than GE, and because Boeing only focuses on aircraft
manufacturing and does not provide a wide range of products and services like GE, Boeing’s
collection progress was much more rapid than GE.

2. Account Payable
Table 14: Account Payable Ratios of GE

Time 2019 2020 2021 2022 2023

16.476B 16.243B 18.644B 15.408B

Account Payable 15.926B
(+3.45%) (-1.41%) (+14.78%) (-17.35%)

60.421B 53.896B 55.535B 50.392B

COGS 66.911B
(-9.7%) (-10.8%) (+3.04%) (-9.26%)

3.73 (- 3.3 3.18 2.96

Payable Turnover 4.20
11.19%) (-11.53%) (-3.63%) (-6.92%)

Payables Conversion 98 110 115 123

87
Period (+12.64%) (+12.24%) (+4.54%) (+6.95%)

Accounts Payable represents the amount the company owes to its creditors and suppliers.
Overall, while GE's account payable balance fluctuated somewhat, reaching a high of $18.644
billion in 2022, it has returned to nearly its 2019 level by 2023. In contrast, the cost of goods
sold (COGS) has seen a steady decline over the same period. This trend is reflected in a
decrease in GE's payable turnover ratio and a corresponding increase in the payables
conversion period, indicating that GE is taking longer to settle its accounts payable, might
due to problems with their cash flow or a change in negotiating power with suppliers.

35
GE's account payable balance increased by 3.45% in 2020 but then dipped slightly in 2021.
This can be explained by the Covid 19 pandemic effect, as in 2020 due to decrease in
Revenue making them lack money in order to pay their payment, forcing them to delay it.
And in 2021, they started to slowly recover from the pandemic, leading to a slight decrease of
1.41%. However, their account payable rose again in 2022 by a more substantial 14.78%,
before falling by 17.35% in 2023, linking it with the 15.08% increase in Account Receivable
and 0.45% decrease in Receivable Turnover from the previous table, GE might have problems
with cash flow during this time as they could not collect enough money on time to pay for
their supplier as the COGS in 2022 also increase by 3.04%. Despite this fluctuation, the
overall change between 2019 and 2023 is minimal, at around a 3% decrease.

GE's cost of goods sold (COGS) has seen a more consistent downward trend. In 2019, COGS
stood at $66.911 billion, and because of the covid-19 pandemic, COGS decreased by 9.7%
and 11.53% in the next 2 years, as they had to cut down the costs to save profit. Moving to
2022, their COGS had risen 3.04% (like mentioned before), showing the need for material to
respond to orders from customers, leading to an increase in Revenue . And by 2023, this
figure had decreased by nearly 17% (compared to 2019) to $50.392 billion. This suggests a
potential decrease in production output or a shift in the company's product mix towards lower-
cost goods.

The payable turnover ratio, which indicates how often a company pays off its accounts
payable within a year, has decreased from 4.20 in 2019 to 2.96 in 2023. This reflects a decline
in payment efficiency, as a lower ratio signifies a longer payment period. Similarly, the
payables conversion period, which shows the average time taken to settle accounts payable,
has increased from 87 days in 2019 to 123 days in 2023. This confirms the trend of GE taking
longer to pay its suppliers.

 Comparison with other competitors and industry

Table 15: Account Payable Turnover of GE, Boeing, Honewell and Energy Industry

Time 2019 2020 2021 2022 2023

GE Co. 4.20 3.73 3.3 3.18 2.96

36
 Boeing Co. 4.63 4.94 6.40 6.18 5.86

Honeywell Inc. 4.25 3.86 3.40 3.53 3.36

Industrials 7.40 7.38 7.79 7.56 7.80

According to the account payable turnover ratio, GE continuously underperformed the other
two businesses (Boeing and Honeywell) and the industry average in terms of payment
efficiency over the course of the four-year period (2019–2023). With a ratio of 2.96 (average
payment term of 123 days) in 2023, GE hit its lowest point, while the industry average
continued to be far higher. Boeing continued to move at a higher rate throughout this period,
achieving a 2023 ratio of 5.86 (or around 62 days). Compared to GE, Honeywell's turnover
ratio varied a little but generally remained nearer the industry average; in 2023, it was 3.36 (or
about 109 days). This pattern indicates that, in comparison to its competitors and the industry
standard, GE may be experiencing cash flow problems, have less negotiating power with
suppliers, or have changed internal policies, which is causing it to pay suppliers more slowly.

V. Overall, how does the company manage its working capital? Does it affect the
stock price during the period analysis?
1. How does the company manage its working capital

37
 1.1. General working capital analysis
a. Working capital

Time 2023 2022 2021 2020 2019

Current Assets 59,799 66,234 66,348 88,412 90,016

Current Liabilities 50,876 56,947 51,953 56,069 77,572

Working Capital 8,923 9,287 14,395 32,343 12,444

Figure: General Electric ‘s working capital (dollars in millions)

source: Investing.com
Overall, the 5-year period witnessed a downward trend in GE’s Working capital (WC), from
12,444 million (2019) to 8,923 (2023). From 2019 to 2020, GE’s Working capital showed a
considerable spike of 19,899 million US.This increase can be attributed to the fact that the
company used their cash reserves to pay down short-term debt, hence, reduce current liability.
From 2020, GE’s working capital gradually decreased. That GE began to use cash reserves to
purchase its own outstanding shares led to the decline in its current assets.By reallocating
38
these funds toward buybacks, liquidity within the company became constrained, directly
impacting its ability to maintain previous levels of working capital Also, during COVID-19,
GE's aviation unit, which had been GE's most profitable unit, was especially hit hard. Amid
pandemic travel curbs, demand for aircraft engines and related maintenance plummeted. All
of this may contribute to the considerable fall in WC from 32,343 million (2020) to 8,923
million (2023). However, the decrease in working capital may not be necessarily a bad thing,
as decrease in working capital but can also result in improved cash flow and profitability.

b. Working Capital Turnover ratio

Time 2023 2022 2021 2020 2019

Sales 64.565 73.602 71.09 73.022 87.487

Working capital 8.923 9.287 14.395 32.343 12.444

Working capital turnover 7.24 7.93 4.94 2.26 7.03

Figure:G.E’s Working Capital Turnover (in days)

source: Investing.com
An examination of the working capital turnover ratio for General Electric (GE) reveals a
troubling upward trend. The ratio declined materially from approximately 7.03 in 2019 to
2.26 in 2020. This signifies a deterioration in GE's ability to convert current assets, such as
39
inventory and receivables, into cash through sales. A reason for this may be the fact that GE’s
jet engine business got slammed by a “rapid decline” in global commercial aviation orders
due to COVID shutdown. However, the ratio showed a gradual recovery since 2020, to 7.24
in 2023, indicating a positive development for GE.

c. Liquidity

Time 2023 2022 2021 2020 2019

Current assets 59,799 66,234 66,348 88,412 90,016

Total quick assets 39,639 45,935 48,568 71,000 66,763

Total cash assets 22,673 24,871 28,067 43,949 46,282

Current liabilities 50,876 56,947 51,953 56,069 77,572

Current ratio 1.18 1.16 1.28 1.58 1.16

Quick ratio 0.78 0.81 0.93 1.27 0.86

Cash ratio 0.45 0.44 0.54 0.78 0.60

Figure:Current, Quick and Cash ratio

40
 source: stock analysis on net
Current ratio: GE’s current ratio from 2019 to 2023 reveals a trend of moderate
fluctuations with an underlying sign of improvement. While the ratio remained above 1
throughout this period, indicating sufficient short-term liquidity, there were some notable
year-on-year changes. After reaching its peak at 1.58 in 2020, the current ratio gradually
decreased in the following years to 1.18 in 2023. The increase in 2020 could be due to
factors like increased cash holdings or reduced short-term debt, whereas the decrease in
2021 might be attributable to cash reserves, depletion or a rise in short-term liability.
Quick ratio: From 2019 to 2023, GE has exhibited a fluctuating yet generally ascending
trend in its Quick Ratio. Beginning at 0.86 in 2019, it climbed to 1.27 in 2020,
showcasing a robust liquidity position. However, a subsequent decline to 0.78 in 2023,
though slightly lower than the previous year's 0.81, suggests a slight liquidity strain.
Nonetheless, the overall trajectory demonstrates an enhanced capacity for GE to utilize its
most readily available assets to settle short-term liabilities, albeit with a recent
moderation. This improvement indicates potential efficiency in managing short-term
financial obligations
Cash ratio: Over the observed period from 2019 to 2023, GE has experienced a declining
trend in its Cash Ratio. Beginning at 0.60 in 2019, the ratio dropped to 0.45 in 2023,
indicating a reduction in the proportion of liquid assets available to settle short-term
obligations. This downward trajectory may raise concerns about GE's liquidity position,
particularly in terms of its reliance on readily available cash reserves to meet immediate
financial demands.
In 2020, General Electric (GE) experienced peak values in all current asset ratio, quick
ratio and cash ratio, indicating significant liquidity strength during that period. One major
factor influencing this exceptional performance was the global COVID-19 pandemic. In
response to the pandemic's economic disruptions, GE may have implemented strategic
measures to bolster its current asset, quick asset and cash asset. Additionally, government
stimulus packages and financial support measures aimed at mitigating the pandemic's
impact on businesses could have provided GE with additional liquidity buffers.

d. Profitability

Table 16: G.E’s Profit Margin, ROE and ROA ratio table

Time 2023 2022 2021 2020 2019

41
 Sales 64,565 73,602 71,090 73,022 87,487

Operating Income 5,482 4,454 6,096 4,012 11,237

Net Income 9,481 225 -6,520 5,704 -4,979

Total Equity 27,378 36,366 40,310 35,552 28,316

Total Asset 163,045 187,788 198,874 253,452 266,048

Profit margin
8.49% 6.05% 8.58% 5.49% 12.84%
(ROS)

ROE 34.63% 0.62% -16.17% 16.04% -17.58%

ROA 5.81% 0.12% -3.28% 2.25% -1.87%

source: stock analysis on net

ROS: In 2019, GE achieved a healthy ROS of 12.84%, indicating a strong ability to generate
profit per dollar of sales. This profitability declined significantly in 2020, as evidenced by a
drop in ROS to 5.49%. However, GE appears to have reversed this trend in 2023, with the
ROS recovering to its 2019 level (8.49%).
ROE: From 2019 to 2023,GE's ROE exhibited a rollercoaster ride, from -17.58% in 2019 to
34.63% in 2023. After a dramatic plunge of 33.62% in 2020, ROE significantly decreased to -
16.17% in 2021. Fortunately, a steep recovery emerged from 2022.
ROA: Like ROE, the period from 2019 to 2021 seems to be volatile years with both a
positive ROA trend from 2019-2020 and a negative trend from 2020-2021. While there were
slight positive ROA figures in 2020 (2.25%) and 2022 (0.12%), these values remained very
low till it reached the peak in 2023 of 5.81%.
Overall, All three metrics (ROS, ROE, ROA) exhibit a degree of volatility across the years,
reflecting fluctuations in GE's overall financial performance. 2020 seems to be a year of
dramatic change with all of the ratios witnessing significant rise or fall.The year 2020
coincided with the global economic downturn caused by the COVID-19 pandemic, which led
to declining sales, increased costs and asset underutilization. The picture in 2023, on the other
hand, is positive with the recovery in all three metrics suggesting genuine improvement in
company operation compared to pre-2021 levels.

e. Cash Conversion Cycle (CCC)

42
 Time 2023 2022 2021 2020 2019

Average inventory processing period 120 114 107 96 77

Average receivable collection period 87 89 80 83 70

Average payables payment period 112 123 110 100 87

Cash conversion cycle 95 80 77 79 60

Figure: GE’s Cash Conversion Cycle

The data shows an increase in CCC from 60 days in 2019 to 95 days in 2023. This suggests a
deterioration in GE's efficiency in converting inventory into sales and collecting customer
payments. The downgrade may cause several bad impacts on the company's financial health,
including less cash readily available, limiting GE's ability to grow and overreliance on
borrowing to bridge the cash flow gap, leading to higher interest expenses.
There are 2 main aspects to take into account in order to explain the negative CCC of GE:

Slower Inventory Turnover: GE is holding onto inventory for a longer period before
selling it. This ties up valuable cash in unsold products.
Delayed Customer Payments: GE is taking longer to collect payments from
customers. This creates a cash flow gap and delays the conversion of sales into cash.
f. Leverage
43
  Debt to Equity

Table 17: Debt to Equity ratio

Time 2023 2022 2021 2020 2019

Total debt 20,964 32,350 35,185 75,066 90,882

Total equity 27,378 36,366 40,310 35,552 28,316

Debt to 0.77 0.89 0.87 2.11 3.21

equity

source: stock analysis on net

General Electric's (GE) recent debt restructuring efforts have yielded commendable results,
marked by a substantial reduction in total debt and a corresponding improvement in the debt-
to-equity (D/E) ratio. This transformation, from a concerning 3.21 in 2019 to a more
favorable 0.77 in 2023, reflects a strategic shift towards a healthier capital structure. The
significant decline in debt from 90,882 in 2019 to 20,964 in 2023 seems to be the main reason
for this downward trend in the ratio. It not only mitigates GE's financial risk but also enhances
its creditworthiness and resilience to economic uncertainties.

 Time interest earned:

Time 2023 2022 2021 2020 2019

Interest expense 1,118 1,607 1,876 3,273 4,227

Earnings before
11,309 3,019 -1,807 8,470 5,376
interest and tax (EBIT)

Time interest earned 10.12 1.88 -0.96 2.59 1.27

Interest expense 1,118 1,607 1,876 3,273 4,227

source: stock analysis on net

Overall, GE times interest earned has taken a jump from 1.86 in 2019 to 29.84 in 2023.
Before a sudden upsurge to 29.84 in 2023, GE experienced negative times interest earned in
2021, at -4.3, which means that the company will have difficulty paying its interest expense.

44
The recovery signifies a remarkable improvement in their financial health and reduced
reliance on debt, which makes the company more favorable for investors.

1.2. Comparison with Competitor and the Industry

To evaluate GE’s working capital management further, our group has compared its
ratios to its main competitor - Honeywell International Inc. and to the industry.

a. Working Capital
Table: Working Capital between GE and Honeywell

Time 2023 2022 2021 2020 2019

General electric 8,923 9,287 14,395 32,343 12,444

Honeywell International Inc. 4,963 5,044 5,864 8,978 6,205

source: Ychart

When comparing GE’s average working capital during the period 2019-2023,it is easy to
notice that GE’s working capital is considerably larger than Honeywell. This indicates that
GE could use the more current assets to finance its day-to-day operation. It illustrates that the
company wanted to make sure that it could always meet its short-term debt obligation.

b. Working Capital Turnover ratio

Table: Working Capital Turnover ratio (in Days) between GE, Honeywell, and the industry

Time 2023 2022 2021 2020 2019

General electric 8,923 9,287 14,395 32,343 12,444

Honeywell International Inc. 4,963 5,044 5,864 8,978 6,205

Industrials 11.98 9.68 6.57 4.40 10.12

source: stock analysis on net

Compared to Honeywell - its main competitor, GE has the same level of working capital
turnover. On the other hand, working capital turnover of GE was considerably lower than that
of the industry, which meant that they're taking longer than the industry average to convert
these assets into cash through sales. This may be considered a bad sign as investors might

45
think GE had potential inefficiency in managing current assets, likely due to excess inventory
or slow collections.
c. Liquidity
Table:Current ratio, Quick ratio and Cash ratio between GE, Honeywell, and the industry

Time 2023 2022 2021 2020 2019

Current ratio

General electric 1.18 1.16 1.28 1.58 1.16

Honeywell 1.27 1.25 1.30 1.47 1.34

International Inc.

Industrials 1.17 1.21 1.32 1.43 1.19

Quick ratio

General electric 0.78 0.81 0.93 1.27 0.86

Honeywell 0.84 0.88 0.94 1.15 0.99

International Inc.

Industrials 0.65 0.70 0.79 0.88 0.71

Cash ratio

General electric 0.45 0.44 0.54 0.78 0.60

Honeywell 0.44 0.51 0.59 0.79 0.58

International Inc.

Industrials 0.26 0.29 0.36 0.46 0.34

source: stock analysis on net

In general, the current ratios of GE were slightly lower than those of the whole industry
while the figures of Honeywell maintained much higher during the 5-year period. This
suggests that GE might have a slightly lower ability to meet its short-term obligations (due
within a year) using its current assets (assets convertible to cash within a year) compared to
Honeywell and the industry standard.GE’s cash ratios were 0.2 higher than those of the
industry while these ratios of Honeywell were about the same level as GE.This could be a
46
positive sign, suggesting GE might have good immediate access to cash to meet short-term
needs. Moreover, both GE and Honeywell have a higher quick ratio compared to the industry.
This suggests that both GE and Honeywell have a larger buffer of these highly liquid assets
readily available to cover upcoming payments to suppliers, creditors, and other short-term
liabilities.

d. Probability
Table: ROS, ROE and ROA (in %) between GE, Honeywell, and the industry

Time 2023 2022 2021 2020 2019

ROS

General electric 8.49% 6.05% 8.58% 5.49% 12.84%

Honeywell 19.32% 18.12% 18.03% 17.45% 18.66%

International Inc.

Industrials 9.58% 9.22% 9.67% 4.46% 9.61%

ROE

General electric 34.63% 0.62% -16.17% 16.04% -17.58%

Honeywell 35.68% 29.74% 29.85% 27.23% 33.22%

International Inc.

Industrials 27.86% 15.98% 17.17% 4.29% 14.53%

ROA

General electric 5.81% 0.12% -3.28% 2.25% -1.87%

Honeywell 9.20% 7.97% 8.60% 7.40% 10.47%

International Inc.

Industrials 5.53% 3.44% 3.87% 0.78% 2.43%

source: stock analysis on net

Looking into both companies’ profitability ratio, GE’s ROS,ROA and ROE are significantly
lower than Honeywell during the 2019-2023 period. Moreover, while GE reported negative

47
ratios in ROE and ROA throughout the period, Honeywell reported highly positive ratios,
even higher than the industry average. While it is hard to say GE is falling behind its
competitor, as long as GE remains unprofitable, investors may still hold their doubt of the
performance of the company.
e. Cash Conversion Cycle
Table: Cash Conversion Cycle (in Days) between GE, Honeywell, and the industry

Time 2023 2022 2021 2020 2019

General electric 95 80 77 79 60

Honeywell International Inc. 64 64 50 55 55

Industrials 91 91 95 101 91

source: stock analysis on net

When we look into GE’s biggest competitor, Honeywell, it can be seen from the chart above
that GE has a significantly higher Cash Conversion Cycle than Honeywell during the 2019-
2023 period, average at only 78 days. This means that GE may have problems in operational
efficiency and its ability to convert its inventory into cash compared to its competitor.
However, the figure of GE is still remarkably lower than industry average, indicating that GE
still somewhat has a moderately efficient cash flow management through fast inventory
turnover and collections.
f. Leverage

 Debt to Equity

Table:Debt to Equity ratio between GE, Honeywell, and the industry

Time 2023 2022 2021 2020 2019

General electric 0.77 0.89 0.87 2.11 3.21

Honeywell International Inc. 1.29 1.17 1.06 1.28 0.87

Industrials 1.50 1.37 1.27 1.78 1.92

source: stock analysis on net

The 5-year period witnessed a downward trend in GE’s debt to equity ratio but a positive one
in that of Honeywell. From 2021, GE had a much lower D/E ratio compared to Honeywell
48
and the Industry which means that GE used little debt to finance its operations. This generally
translates to a less risky financial position, which can be attractive to investors seeking stable
companies.

 Time interest earned

49
 Table: Time interest earned between GE and Honeywell

Time 2023 2022 2021 2020 2019

General electric 10.12 1.88 -0.96 2.59 1.27

Honeywell International Inc. 10.26 16.41 22.09 17.75 22.17

Industry 6.92 5.50 6.00 02.09 4.48

source: Ychart

Compared to GE, Honeywell's TIE ratio has been more stable over the period, consistently
above 10. This suggests a stronger and more consistent ability to cover interest expenses with
operating income. However, while the figure of GE increased throughout the years, an
opposite trend was witnessed in that of Honeywell. Although in early years, GE's ratio is
significantly below industry average, the situation seems to be brighter in 2023.It can be
concluded that GE is generating more and more operating income relative to its interest
expenses compared to Honeywell as the time goes by.

2. Correlation between Amazon’s Working Capital and Stock Price

2.1. Stock Price

Figure: GE’s Stock Price

source: Ychart

In 2019, under CEO Culp, GE took significant steps to improve its financial health. This
involved reducing debt and selling off non-core businesses like its stake in Baker Hughes and

50
its transportation unit. These divestitures generated substantial cash and boosted the stock
price by 53% in 2019.
Unfortunately, the global pandemic disrupted GE's recovery. The share price plummeted to a
28-year low in May 2020.
As the global economy started to recover in 2021, GE's share price rebounded by nearly 10%.
The company also announced a major restructuring plan to split into three separate businesses
focused on aviation, medical equipment, and power & energy sectors.
General Electric has faced challenges within its Renewable Energy segment throughout 2022,
with issues such as supply-chain disruptions, labor and material shortages, and elevated
logistics costs impacting its operations negatively. Consequently, General Electric's shares
have experienced a decline of approximately 14% over the course of the year.
Analysis of more recent data from 2023 suggests an upward trajectory in the firm's financial
performance, contributing to a gradual increase in its stock price. GE’s stock price reached its
peak in December 2023, at 101.86, the highest in 5 years.
2.2. Correlation between Amazon’s Working Capital and Stock Price

The correlation coefficient between GE's working capital and its stock price is
approximately -0.39

The figure shows the negative relationship between GE’s stock value and its working capital
as GE’s working capital dropped significantly while stock price skyrocketed during the 5-
year period. A reduction in working capital could signify improved management of inventory
and receivables. Lower inventory levels potentially reflect better demand forecasting and
reduced carrying costs. Similarly, efficient collection of receivables could free up cash flow.
This focus on operational efficiency might free up cash for strategic investments or debt
repayment, ultimately leading to a more positive investor sentiment and a potential rise in
stock price.

3. Conclusion
In conclusion, General Electric (GE) has navigated through a challenging five-year period
marked by significant fluctuations in its working capital and stock price. The downward trend
in working capital, particularly notable after 2020, can be attributed to various factors such as
strategic debt reduction, challenges in the aviation unit due to the COVID-19 pandemic, and
issues within the Renewable Energy segment. Despite facing obstacles, GE has demonstrated
resilience and adaptability, as evidenced by its gradual recovery in the working capital

51
turnover ratio and the recent upward trajectory in financial performance indicated by the
increase in stock price. The negative correlation coefficient between GE's working capital and
stock price suggests a complex relationship, with reductions in working capital potentially
signaling improved operational efficiency and investor confidence. Moving forward, GE's
focus on optimizing inventory management and receivables collection could lead to enhanced
liquidity and profitability, further bolstering investor sentiment and driving continued growth
in its stock price.

VI. Problems of GE during the period 2019 to 2023 and how the company solved
them
1. Identify the problems
In 2019, although the company’s sales were quite high at about more than 87 billion USD,
they still had a loss of more than 5 billion USD. This was mostly because the Cost of goods
sold and Selling and Administrative expenses of the company took a large proportion of
Annual Sales.

2019
Consolidated Income Statement
($ millions)
Sales of equipment 58,949
Sales of services 28,538
Sales of equipment and services 87,487
Cost of equipment sold (45,902)
Cost of services sold (21,009)
Cost of equipment and services sold (66,911)
Gross profit from sales 20,576
Insurance revenues 7,728
Selling, general and administrative expenses (13,949)
Research and development (3,118)
Operating earnings 11,237
Interest and other financial charges (4,227)
Debt extinguishment costs —
Insurance losses, annuity benefits and other costs (3,753)
Goodwill impairments (1,486)
Non-operating benefit income (cost) (2,844)

52
 Other income 2,222
Earnings (loss) from continuing operations before income
taxes 1,149
(Provision) benefit for income taxes (726)
Earnings (loss) from continuing operations 423
Earnings (loss) from discontinued operations, net of taxes (5,335)
Net earnings (loss) (4,912)
Net (earnings) loss attributable to noncontrolling interests (67)
Net earnings (loss) attributable to the Company (4,979)
Preferred stock dividends and other (460)
Net earnings (loss) attributable to GE common shareholders (5,439)

In 2020, because of the COVID-19 pandemic, the Annual Sales of GE decrease to

nearly 73 billion USD. However, the company still recorded a positive net income of about 5
billion USD. This was mostly because of the gain from the sale of BioPharma in that year.
This gain was recorded in other income.
2020
Consolidated Income Statement
($ millions)
Sales of equipment 49,464
Sales of services 23,558
Sales of equipment and services 73,022
Cost of equipment sold (42,041)
Cost of services sold (18,380)
Cost of equipment and services sold (60,421)
Gross profit from sales 12,601
Insurance revenues 6,597
Selling, general and administrative expenses (12,621)
Research and development (2,565)
Operating earnings 4,012
Interest and other financial charges (3,273)
Insurance losses, annuity benefits and other costs (2,779)
Goodwill impairments (1,717)
Non-operating benefit income (cost) (2,433)

53
 Other income 11,387
Earnings (loss) from continuing operations before income
taxes 5,197
(Provision) benefit for income taxes 475
Earnings (loss) from continuing operations 5,672
Earnings (loss) from discontinued operations, net of taxes (126)
Net earnings (loss) 5,546
Net (earnings) loss attributable to noncontrolling interests 158
Net earnings (loss) attributable to the Company 5,704
Preferred stock dividends and other (474)
Net earnings (loss) attributable to GE common shareholders 5,230

(a) Included a pre-tax gain of $12,362 million on the sale of BioPharma in 2020. Included a
pre-tax gain of $224 million on the sale of ServiceMax partially offset by charges to the
valuation allowance on businesses classified as held for sale of $245 million in 2019. Included
pre-tax gains of $737 million on the sale of Distributed Power, $681 million on the sale of
Value-Based Care and $267 million on the sale of Industrial Solutions, partially offset by
charges to the valuation allowance on businesses classified as held for sale of $554 million in
2018.

In 2021, GE’s annual sales and net income decreased compared to 2020 and GE had to
repay more than 36 billion USD of long-term debts. However, their operating and investing
cash flows were not enough to cover the payment of debts. The company was on the edge of
default and loss of reputation.

2. How did the company solve the problem

54
 In order to repay the long-term debts, the company had to sell PPE and used their excess
cash to cover the huge amount of debts. This act led to the significant reduction in GE’s
cash balance at the end of 2021 compared to 2020.
2021
Consolidated Cash Flow Statement
($ millions)
Net earnings (loss) (6,591)
(Earnings) loss from discontinued operations activities 3,195
Depreciation and amortization of property, plant and
equipment 1,871
Amortization of intangible assets 1,138
(Gains) losses on purchases and sales of business interests 40
(Gains) losses on retained and sold ownership interests and
other equity securities (1,656)
Debt extinguishment costs 6,524
Principal pension plans cost 2,650
Principal pension plans employer contributions (326)
Other postretirement benefit plans, net (1,144)
Provision (benefit) for income taxes (286)
Cash paid during the year for income taxes (1,165)
(Increase) decrease in current receivables (177)
(Increase) decrease in inventories, including deferred
inventory costs (702)
(Increase) decrease in current contract assets 1,031
Increase (decrease) in accounts payable and equipment
project payables (2)
Increase (decrease) in progress collections and current
deferred income (1,052)
Changes in operating working capital (902)
Financial services derivatives net collateral/settlement (1,143)
All other operating activities (1,317)
Adjustments to reconcile net earnings (loss) to cash
from operating activities 4,284
Cash from operating activities 888

55
 Additions to property, plant and equipment and internal-use
software (1,361)
Dispositions of property, plant and equipment 167
Proceeds from sale of discontinued operations 22,356
Proceeds from principal business dispositions 1
Net payments for principal businesses purchased (1,550)
Dispositions of retained ownership interests 4,145
Net purchases of insurance investment securities (1,290)
All other investing activities 1,237
Cash from investing activities 23,705
Net increase (decrease) in borrowings, maturities of 90 days or
less (710)
Newly issued debt, maturities longer than 90 days 364
Repayments and other debt reductions, maturities longer than
90 days (36,521)
Dividends paid to shareholders (575)
Cash received (paid) for debt extinguishment costs (7,196)
Purchases of GE common stock for treasury (107)
All other financing activities (551)
Cash used for financing activities (45,296)
Cash from (used for) operating activities, discontinued
operations 2,444
Cash (used for) from investing activities, discontinued
operations (2,397)
Cash from (used for) financing activities, discontinued
operations 119
Cash from (used for) discontinued operations 166
Effect of currency exchange rate changes on cash, cash
equivalents and restricted cash (213)
Increase (decrease) in cash, cash equivalents and restricted
cash (20,750)
Cash, cash equivalents and restricted cash at beginning of year 37,609
Cash, cash equivalents and restricted cash at end of year 16,859

56
 Compare the balance sheets of 2020 and 2021, it can be seen that the cash decreased
significantly. This could affect the company’s purchasing power for the upcoming years.
Although GE’s long term debts decreased from 2020 to 2021, their PPE and cash plummetted
as a result of debt repayment.
US$ in millions
2020 2021
Cash, cash equivalents and restricted cash 36,630 15,770
Investment securities 7,319 12,297
Current receivables 16,691 15,620
Financing receivables, net 1,265 -
Inventories, including deferred inventory costs 15,890 15,847
Other GE Capital receivables 3,331 -
Current contract assets 5,764 4,881
All other current assets 1,522 1,933
Assets of businesses held for sale - -
Current assets 88,412 66,348
Investment securities 42,549 42,209
Financing receivables, net 1,771 -
Other GE Capital receivables 4,661 -
Property, plant and equipment, net, excluding ROU operating lease
41,675 13,003
assets
ROU operating lease assets 2,987 2,606
Goodwill 25,524 26,182
Other intangible assets, net 9,774 9,330
Contract and other deferred assets 5,888 6,124
All other assets 14,598 19,040
Deferred income taxes 12,081 10,855
Assets of discontinued operations 3,532 3,177
Non-current assets 165,040 132,526
Total assets 253,452 198,874

Liabilities and Equity

57
 Short-term borrowings 4,778 4,361
Accounts payable and equipment project payables 16,476 16,243
Progress collections and deferred income 18,215 17,372
All other current liabilities 16,600 13,977
Liabilities of businesses held for sale - -
Current liabilities 56,069 51,953
Deferred income 1,801 1,989
Long-term borrowings 70,288 30,824
Insurance liabilities and annuity benefits 42,191 37,166
Non-current compensation and benefits 29,752 21,202
All other liabilities 16,077 13,241
Liabilities of discontinued operations 200 887
Non-current liabilities 160,309 105,309
216,37 157,26
Total liabilities
8 2

Preferred stock
6 6
70 1
Common stock
2 5
Accumulated other comprehensive income (loss), net attributable to (9,74 1,58
GE 9) 2
34,30 34,69
Other capital
7 1
92,24 85,10
Retained earnings
7 9
(81,96 (81,09
Common stock held in treasury
1) 3)
35,55 40,31
Total GE shareholders’ equity
2 0
1,52 1,30
Noncontrolling interests
1 2
37,07 41,61
Total equity
3 2

58
 253,45 198,87
Total liabilities, redeemable noncontrolling interests and equity
1 4

VII. General Electric’s long-term financial planning and short-term cash budget
In this section, we are going to prepare the strategic financial blueprint that General
Electric (GE) has crafted for the years 2024 to 2026. This comprehensive plan is designed to
navigate the company through the evolving economic landscape, ensuring sustainable growth
and profitability. We will also prepare GE's short-term cash budget for the year 2024, which
serves as a pivotal tool for managing immediate financial obligations and operational needs.
By aligning its long-term financial objectives with its short-term liquidity requirements, GE
aims to ensure its financial health and drive value creation for its stakeholders. The forecast
will use the sales-based approach.

1. Long-term financial planning

1.1. Revenue forecast
We forecast the revenue for the period from 2024 to 2026 by using the TREND formula for 3
previous years from 2021 to 2023. Below are the predicted annual sales of GE for 2024 to
2026.

1.2. Pro Forma Income Statement

General Electric Co.
Consolidated Income Statement

2023
($ millions) % of Sales
Sales of equipment 26,

59
 793
37,
Sales of services
772
64,
Sales of equipment and services
565 100.00%
(27,6
Cost of equipment sold
83) 42.88%
(22,7
Cost of services sold
09) 35.17%
(50,3
Cost of equipment and services sold
92) 78.05%
14,
Gross profit from sales
173
3,
Insurance revenues
389 5.25%
(9,1
Selling, general and administrative expenses
95) 14.24%
(9
Separation costs
78) NM
(1,9
Research and development
07) 2.95%
5,
Operating earnings
482
(1,1
Interest and other financial charges
18) NM
(2,8
Insurance losses, annuity benefits and other costs
86) 4.47%
1,
Non-operating benefit income (cost)
585 NM
7,
Other income
128 NM
Earnings (loss) from continuing operations before 10,
income taxes 191
(Provision) benefit for income taxes (1,1 NM
60
 62)
9,
Earnings (loss) from continuing operations
029
Earnings (loss) from discontinued operations, net of
taxes 414
9,
Net earnings (loss)
443
Net (earnings) loss attributable to noncontrolling
interests 38
9,
Net earnings (loss) attributable to the Company
481
(2
Preferred stock dividends and other
95)
Net earnings (loss) attributable to GE common 9,
shareholders 186

Assume that GE’s operation grows in similar proportion of sales from 2024 to 2026 using
2023 as the basis for estimation. We assume that Separation costs, Interest and other financial
charges, Non-operating benefit income (cost), Net (earnings) loss attributable to
noncontrolling interests, and Preferred stock dividends and other will be the same from 2023
to 2026. Also, assume that other income will be fixed at 5 billion USD, provision for income
taxes will be fixed at 1 billion USD.
As the company’s business operations of the previous years were not good, we assume that all
of the net income will be payout as dividend in order to gain investors’ confidence and make
the stock price higher.

General Electric Co.

Consolidated Income
Statement

2024 2025 2026 % of

$ millions $ millions $ millions Sales
Sales of equipment 23,5 19,8 16,1

61
 82 79 75
39,6 40,0 40,5
Sales of services 44 85 25
Sales of equipment 63,2 59,9 56,7
and services 26 64 00 100.00%
(27,1 (25,7 (24,3
Cost of equipment sold 09) 10) 11) 42.88%
(22,2 (21,0 (19,9
Cost of services sold 38) 91) 43) 35.17%
Cost of equipment (49,3 (46,8 (44,2
and services sold 47) 01) 53) 78.05%
Gross profit from 13,8 13,1 12,4
sales 79 63 47
3,3 3,1 2,9
Insurance revenues 19 47 76 5.25%
Selling, general and (9,0 (8,5 (8,0
administrative expenses 04) 40) 75) 14.24%
(9 (9 (9
Separation costs 78) 78) 78) NM
Research and (1,8 (1,7 (1,6
development 67) 71) 75) 2.95%
5,3 5,0 4,6
Operating earnings 48 22 95
Interest and other (1,1 (1,1 (1,1
financial charges 18) 18) 18) NM
Insurance losses, annuity (2,8 (2,6 (2,5
benefits and other costs 26) 80) 34) 4.47%
Non-operating benefit 1,5 1,5 1,5
income (cost) 85 85 85
5,0 5,0 5,0
Other income 00 00 00 NM

62
 Earnings (loss) from
continuing operations 7,9 7,8 7,6
before income taxes 89 08 28
(Provision) benefit for (1,0 (1,0 (1,0
income taxes 00) 00) 00) NM
Earnings (loss) from 6,9 6,8 6,6
continuing operations 89 08 28
6,9 6,8 6,6
Net earnings (loss) 89 08 28
Net (earnings) loss
attributable to noncontrolling
interests 38 38 38
Net earnings (loss)
attributable to the 7,0 6,8 6,6
Company 27 46 66
Preferred stock dividends (2 (2 (2
and other 95) 95) 95)
Net earnings (loss)
attributable to GE 6,7 6,5 6,3
common shareholders 32 51 71

1.3. Pro Forma Balance Sheet

a. Balance Sheet first pass
US$ in millions
2023 % of Sales
Cash, cash equivalents and restricted
cash 16,967 26.28%
Investment securities 5,706
Current receivables 15,466 23.95%
Inventories, including deferred
inventory costs 16,528 25.60%
Current contract assets 1,500
63
 All other current assets 1,647
Assets of businesses held for sale 1,985
Current assets 59,799
Investment securities 38,000
Property, plant and equipment, net,
excluding ROU operating lease assets 10,654 16.50%
ROU operating lease assets 1,840
Goodwill 13,385
Other intangible assets, net 5,695
Contract and other deferred assets 5,406
All other assets 15,996
Deferred income taxes 10,575
Assets of discontinued operations 1,695
Non-current assets 103,246
Total assets 163,045

Liabilities and Equity

Short-term borrowings 1,253
Accounts payable and equipment
project payables 15,408 23.86%
Progress collections and deferred
income 19,677
All other current liabilities 12,712
Liabilities of businesses held for sale 1,826
Current liabilities 50,876
Deferred income 1,339
Long-term borrowings 19,711
Insurance liabilities and annuity
benefits 39,624
Non-current compensation and
benefits 11,214
All other liabilities 10,509

64
 Liabilities of discontinued operations 1,193
Non-current liabilities 83,590
Total liabilities 134,466
Common stock 15
Accumulated other comprehensive
income (loss), net attributable to GE (6,150)
Other capital 26,962
Retained earnings 86,527
Common stock held in treasury (79,976)
Total GE shareholders’ equity 27,378
Noncontrolling interests 1,201
Total equity 28,579
Total liabilities, redeemable
noncontrolling interests and equity 163,045

In the balance sheet, only some components of the balance sheet are sales-based including
Cash, Accounts Receivable, Inventory, PPE, and Accounts Payable. We excluded Retained
Earnings as we assume that all of the net income will be paid out as dividends.
US$ in millions
2024 2025 2026 % of Sales
Cash, cash equivalents and restricted
cash 16,615 15,758 14,900 26.28%
Investment securities 5,706 5,706 5,706
Current receivables 15,145 14,364 13,582 23.95%
Inventories, including deferred
inventory costs 16,185 15,350 14,515 25.60%
Current contract assets 1,500 1,500 1,500
All other current assets 1,647 1,647 1,647
Assets of businesses held for sale 1,985 1,985 1,985
Current assets 58,784 56,310 53,835
Investment securities 38,000 38,000 38,000
Property, plant and equipment, net,
excluding ROU operating lease assets 10,433 9,895 9,356 16.50%

65
 ROU operating lease assets 1,840 1,840 1,840
Goodwill 13,385 13,385 13,385
Other intangible assets, net 5,695 5,695 5,695
Contract and other deferred assets 5,406 5,406 5,406
All other assets 15,996 15,996 15,996
Deferred income taxes 10,575 10,575 10,575
Assets of discontinued operations 1,695 1,695 1,695
Non-current assets 103,025 102,487 101,948
Total assets 161,809 158,797 155,783

Liabilities and Equity

Short-term borrowings 1,253 1,253 1,253
Accounts payable and equipment
project payables 15,088 14,310 13,531 23.86%
Progress collections and deferred
income 19,677 19,677 19,677
All other current liabilities 12,712 12,712 12,712
Liabilities of businesses held for sale 1,826 1,826 1,826
Current liabilities 50,556 49,778 48,999
Deferred income 1,339 1,339 1,339
Long-term borrowings 19,711 19,711 19,711
Insurance liabilities and annuity
benefits 39,624 39,624 39,624
Non-current compensation and
benefits 11,214 11,214 11,214
All other liabilities 10,509 10,509 10,509
Liabilities of discontinued operations 1,193 1,193 1,193
Non-current liabilities 83,590 83,590 83,590
Total liabilities 134,146 133,368 132,589
Common stock 15 15 15
Accumulated other comprehensive
income (loss), net attributable to GE (6,150) (6,150) (6,150)
Other capital 26,962 26,962 26,962

66
 Retained earnings 86,527 86,527 86,527
Common stock held in treasury (79,976) (79,976) (79,976)
Total GE shareholders’ equity 27,378 27,378 27,378
Noncontrolling interests 1,201 1,201 1,201
Total equity 28,579 28,579 28,579
Total liabilities, redeemable
noncontrolling interests and equity 162,725 161,947 161,168
EFN (916) (3,150) (5,385)

After considering all the assumptions, we have the first-pass balance sheet as above. It can
be seen that the EFN is negative, indicating that the company’s Liabilities and Equity is
higher than its Assets.

b. Balance sheet second-pass

US$ in millions
2024 2025 2026 % of Sales
Cash, cash equivalents and
16,615 15,758 14,900 26.28%
restricted cash
Investment securities 5,706 5,706 5,706
Current receivables 15,145 14,364 13,582 23.95%
Financing receivables, net
Inventories, including deferred
16,185 15,350 14,515 25.60%
inventory costs
Current contract assets 1,500 1,500 1,500
All other current assets 1,647 1,647 1,647
Assets of businesses held for sale 1,985 1,985 1,985
Current assets 58,784 56,310 53,835
Investment securities 38,000 38,000 38,000
Property, plant and equipment,
net, excluding ROU operating lease 10,433 9,895 9,356 16.50%
assets
ROU operating lease assets 1,840 1,840 1,840
Goodwill 13,385 13,385 13,385

67
 Other intangible assets, net 5,695 5,695 5,695
Contract and other deferred
5,406 5,406 5,406
assets
All other assets 15,996 15,996 15,996
Deferred income taxes 10,575 10,575 10,575
Assets of discontinued operations 1,695 1,695 1,695
Non-current assets 103,025 102,487 101,948
Total assets 161,809 158,797 155,783

Liabilities and Equity

Short-term borrowings 1,253 1,253 1,253
Accounts payable and equipment
15,088 14,310 13,531 23.86%
project payables
Progress collections and deferred
19,677 19,677 19,677
income
All other current liabilities 12,712 12,712 12,712
Liabilities of businesses held for
1,826 1,826 1,826
sale
Current liabilities 50,556 49,778 48,999
Deferred income 1,339 1,339 1,339
Long-term borrowings 19,711 19,711 19,711
Insurance liabilities and annuity
39,624 39,624 39,624
benefits
Non-current compensation and
11,214 11,214 11,214
benefits
All other liabilities 10,051 8,934 7,816
Liabilities of discontinued
1,193 1,193 1,193
operations
Non-current liabilities 83,132 82,015 80,897
Total liabilities 133,688 131,793 129,896
Common stock 15 15 15
Accumulated other (6,150) (6,150) (6,150)
comprehensive income (loss), net

68
 attributable to GE
Other capital 26,504 25,387 24,270
Retained earnings 86,527 86,527 86,527
Common stock held in treasury (79,976) (79,976) (79,976)
Total GE shareholders’
26,920 25,803 25,802
equity
Noncontrolling interests 1,201 1,201 1,201
Total equity 28,121 27,004 27,003
Total liabilities, redeemable
noncontrolling interests and 161,809 158,797 155,783
equity

In order to balance the balance sheets, we use Other Capital to pay some of the Other non-
current Liabilities as above.

69
 REFERENCES

GE history | GE Founder, History & Company timeline | General Electric. Available at:
https://www.ge.com/about-us/history .

2019 annual report. Available at:

https://www.ge.com/sites/default/files/GE_AR19_AnnualReport.pdf

2020 annual report. Available at:

https://www.ge.com/sites/default/files/GE_AR20_AnnualReport.pdf

2021 annual report. Available at:

https://www.ge.com/sites/default/files/GE_AR2021_AnnualReport.pdf

2022 annual report. Available at:

https://www.ge.com/sites/default/files/ge_ar2022_annualreport_1.pdf

2023 annual report. Available at:

https://www.ge.com/sites/default/files/ge_ar2023_annualreport.pdf .

Martin Nerlinger a et al. (2022) The impact of the Russia-Ukraine conflict on energy firms: A
capital market perspective, Finance Research Letters. Available at:
https://www.sciencedirect.com/science/article/pii/S1544612322004421 .

Bureau of Economic Analysis U.S. Bureau of Economic Analysis (BEA). Available at:
https://www.bea.gov/ .

Egan, M. (2020) Nearly $1 billion of GE earnings was wiped out by Coronavirus | CNN
business, CNN. Available at: https://www.cnn.com/2020/04/29/business/ge-earnings-
coronavirus/index.html .

General Electric Co.: Financial Analysis and Stock Valuation (no date) Stock Analysis on
Net. Available at: https://www.stock-analysis-on.net/NYSE/Company/General-Electric-Co .

Kissinger, D. (2023) General Electric (GE) SWOT Analysis & Recommendations, Panmore
Institute. Available at: https://panmore.com/general-electric-company-ge-swot-analysis-
recommendations .