General Electric’s financing subsidiary (GE Capital Services—GECS) provides financing services for GE’s customers. If you purchase a GE appliance, for example, you could finance it through GECS. In 2012, GECS generated over $46 billion in revenue and reported profits of over $6 billion. These numbers represented approximately 31 percent of the company’s total revenues ($147 billion) and 43 percent of the company’s profits ($13.9 billion). In 2012, the bad debt provision reported on GE’s income statement was $3.9 billion.
a. Compute bad debts as a percentage of revenues. Should you use GE overall revenues or revenues generated by GECS? Why?
b. If GECS prepared its own balance sheet, what would you expect to be the largest accounts?
c. Would you consider GE to be a manufacturing, retail, or service company? Discuss.