Prepare a company analysis for General Electric Company . A checklist for Company Analysis

1. Corporate Profile

? Identify the company’s major products and services; current position in industry; and history

? Composition of sales

? Product life-cycle stages/experience/experience curve effects

? R&D activities

? Past and planned capital expenditures

? Board structure, composition, and electoral system; antitakeover provisions; and other corporate governance issues

? Management strengths, weaknesses, compensation, turnover, and corporate culture

? Benefits, retirements plans, and their influence on shareholder value

? Labor relations

? Insider ownership levels and changes

? Legal actions and the company’s state of preparedness

? Other special strengths or weaknesses

2. Industry Characteristics

? Stage in its life cycle

? Business-cycle sensitivity or economic characteristics

? Typical product-life cycles in the industry (short and marked by technological obsolescence or long, such as pharmaceuticals protected by patents)

? Brand loyalty, customer switching costs, and intensity of competition

? Entry and exist barriers

? Industry supplier considerations (concentration of sources, ability to switch suppliers or enter suppliers’ business)

? Number of companies in the industry and whether it is, as determined by market shares, fragmented or concentrated

? Opportunity to differentiate product/service and relative product/service price, cost, and quality advantages/disadvantages

? Technologies used

? Government regulation

? State and history of labor relations

? Other industry problems/opportunities

3. Analysis of Demand for Products/Services

? Sources of demand

? Product differentiation

? Past record; sensitivities; and correlations with social, demographic, economic, and other variables

? Outlook – short, medium, and long term, including new products and business opportunities

4. Analysis of Supply of Products/Services

? Sources (concentration, competition, and substitutes)

? Industry capacity outlook – short, medium, and long term

? Company’s capacity and cost structure

? Import/export considerations

? Proprietary products or trademarks

5. Analysis of Pricing

? Past relationships among demand, supply, and prices

? Significance of raw material and labor costs and the outlook for their cost and availability

? Outlook for selling prices, demand, and profitability based on current and anticipated future trends

Financial Ratios and Measures (in multiyear spreadsheets with historical and forecast data)

I Activity ratios: measuring how efficiently a company performs such functions as the collection of receivables and inventory management

? Days of sales outstanding (DSO)

? Days of inventory on hand (DOH)

? Days of payables outstanding (DPO)

II Liquidity ratios: measuring a company’s ability to meet its short-term obligations

? Current ratio

? Quick ratio

? Cash ratio

? Cash conversion cycle (DOH + DSO – DPO)

III Solvency ratios: measuring a company’s ability to meet its debt obligations. (in the following, “net debt” is the amount of interest-bearing liabilities after subtracting cash and cash equivalents.)

? Net debt to EBITDA (earnings before interest, taxes, depreciation, and amortization)

? Net debt to capital

? Debt to assets

? Debt to capital (at book and market values)

? Financial leverage ratio (average total assets/average total equity)

? Cash flow to debt

? Interest coverage ratio

? Off-balance-sheet liabilities and contingent liabilities

? Non-arm’s-length financial dealings

IV Profitability ratios: measuring a company’s ability to generate profitable sales from its resources (assets)

? Gross profit margin

? Operating profit margin

? Pretax profit margin

? Net profit margin

? Return on invested capital or ROIC (net operating profits after tax/average invested capital)

? Return on assets or ROA (net income/average total assets)

? Return on equity ROE (net income/average total equity)

V Financial statistics and related considerations: quantities and facts about a company’s finances that an analyst should understand

? Growth rate of net sales

? Growth rate of gross profit

? EBITDA

? Net income

? Operating cash flow

? EPS

? Operating cash flow per share

? Operating cash flow in relation to maintenance and total capital expenditures

? Expected rate of return on retained cash flow

? Debt maturities and ability of company to refinance and/or repay debt

? Dividend payout ratio (common dividends/net income available to common shareholders)

? Off-balance-sheet liabilities and contingent liabilities

? Non-arm’s length financial dealings

Answer rating: 100% (QA)

General Electric Company Analysis In the current fluid business environment ability of the management of a business organization to periodically conduct a thorough business analysis with a focus on th... View the full answer