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Download the most recent Annual Report from General Electric’s (GE) website, typically found on the Investor Relations page. Prepare a report analyzing the use of business mathematics concepts within the financial statements of GE. Your report should include an explanation of how mathematics is applied in the preparation of financial statements, supported by specific examples from the Annual Report. Discuss instances of business problem solving using mathematics as reflected in GE’s financial data.

Additionally, analyze the cost recovery methods employed by GE, describing how these methods are incorporated into the Balance Sheet and Income Statement. Examine the types of indebtedness reported on the Balance Sheet, detailing how interest is calculated on these liabilities.

Perform a horizontal analysis of GE’s Balance Sheet for all fiscal years presented in the report, highlighting significant changes over time. Similarly, conduct a vertical analysis of the Income Statement for each year, focusing on the relative proportions of each line item.

Finally, elucidate the significance of ratios and percentages in financial analysis, emphasizing their role in effectively communicating GE’s financial health and performance.

Paper For Above instruction

The use of business mathematics in preparing and analyzing financial statements is integral to understanding a company's financial health and operational efficiency. For General Electric (GE), a multinational conglomerate, mathematical tools facilitate precise financial reporting, problem solving, and strategic planning. This paper explores how mathematics underpins GE’s financial disclosures and the insights derivable from their annual report.

Fundamentally, financial statement preparation relies heavily on mathematical calculations. For example, calculating depreciation involves methods such as straight-line or declining balance, which allocate costs over the useful life of assets. GE provides detailed notes on its property, plant, and equipment where such calculations are critical (GE Annual Report, 2022). Similarly, amortization of intangible assets employs systematic expense recognition through mathematical formulas, aligning expenses with revenues generated in specific periods.

Mathematics also plays a crucial role in problem-solving within the corporate context. For GE, this may involve analyzing cash flow patterns to optimize liquidity or evaluating project cost estimates against actual expenses. For instance, GE’s project finance division would utilize present value and net present value calculations to determine project feasibility and profitability, aiding in strategic investment decisions (GE Annual Report, 2022).

Cost recovery methods serve to allocate costs systematically over periods or assets. GE employs straight-line depreciation for most fixed assets, simplifying expense recognition. These depreciation figures are reflected in the balance sheet as accumulated depreciation and influence the income statement by reducing taxable income—thus impacting net earnings. Additionally, GE uses amortization for intangible assets, which is systematically accounted for and affects the financial statements accordingly.

Examining GE’s indebtedness, the Balance Sheet reports various liabilities, including short-term debt, long-term bonds, and lease obligations. The interest on these debts is calculated based on contractual rates, often employing simple or compound interest formulas. For example, bonds payable often accrue interest semi-annually at specified rates, and the amortized cost method ensures that the impact of bond discounts or premiums is accurately reflected over time (GE Annual Report, 2022).

A horizontal analysis tracks changes in financial statement items over multiple periods, providing insights into growth trends or areas of concern. Analyzing GE’s Balance Sheet from 2020 to 2022 reveals significant increases in assets, driven by acquisitions and investments in infrastructure (GE Annual Report, 2022). This trend reflects strategic growth efforts. Similarly, a vertical analysis examines each income statement item as a percentage of total revenue, highlighting shifts in profit margins or cost structures. For GE, gross margin stability over the years indicates effective cost control, even amidst fluctuating revenues (GE Annual Report, 2022).

Ratios and percentages are vital tools in financial analysis because they standardize data, allowing for meaningful comparisons across periods or against industry benchmarks. Ratios like debt-to-equity, return on assets (ROA), and current ratio provide quick perspectives on financial stability, profitability, and liquidity. For instance, GE’s debt-to-equity ratio assists investors in assessing leverage and risk, reinforcing the importance of quantitative measures in communicating financial results effectively (Brigham & Ehrhardt, 2019).

In conclusion, mathematics is foundational to the preparation, analysis, and interpretation of financial statements. For GE, mathematical concepts and formulas underpin critical calculations such as depreciation, interest expense, and financial ratios, which in turn support strategic decision-making. Horizontal and vertical analyses, along with ratios and percentages, serve as essential tools to communicate the company’s financial trajectory and overall health to stakeholders.

References

• General Electric. (2022). Annual Report 2022. Retrieved from https://www.ge.com/investor-relations
• Brigham, E. F., & Ehrhardt, M. C. (2019). Financial Management: Theory & Practice (16th ed.). Cengage Learning.
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• White, G. I., Sondhi, A. C., & Fried, D. (2018). The Analysis and Use of Financial Statements. Wiley.
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