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General Electric: Genuine Risk of Collapse?

Discussion in 'The Economy' started by Tropo, 19th Dec, 2008.

  1. Tropo

    Tropo Well-Known Member

    17th Aug, 2005
    General Electric: Genuine Risk of Collapse?

    The first signs of cracks in this global institution appeared in April 2008. GE has met their earnings projections consistently for decades. It is widely known that they are masters of “legal” earnings manipulation.
    Accounting rules allow for wide discretion in reserves and estimates. GE Capital has always been a black box within the larger company.
    GE does not provide detailed financial information about this division. This lack of detail has allowed GE to use this division as its backstop for meeting earnings estimates. During a better than expected quarter, they take extra reserves and have the quarter meet estimates or beat by one cent.
    During a down quarter, they use those excess reserves to meet estimates. The GE Capital division would also sell liquid assets at the end of a quarter to guarantee smooth sailing.
    This earnings management had lulled analysts and stockholders into being complacent regarding GE’s business.
    more ... General Electric: Genuine Risk of Collapse? - Seeking Alpha