QRB/501 QUANTITATIVE REASONING FOR BUSINESS
rholmes123| General Electric Financial Reporting Data | |||||||||||||||||||
| Revenue, Expense, and Gross Profit (in millions) | |||||||||||||||||||
| Actual | |||||||||||||||||||
| YEAR | Revenue | Expense | Gross Profit | Tax Rate % | Discount Rate % | ||||||||||||||
| 2011 | $ 147,300 | $ 44,379 | $ 79,022 | 35% | 12% | ||||||||||||||
| 2012 | $ 147,359 | $ 43,135 | $ 73,049 | 35% | 12% | ||||||||||||||
| 2013 | $ 146,045 | $ 42,637 | $ 68,904 | 35% | 12% | ||||||||||||||
| 2014 | $ 148,589 | $ 40,567 | $ 67,278 | 35% | 12% | ||||||||||||||
| 2015 | $ 117,386 | $ 17,831 | $ 34,693 | 35% | 12% | ||||||||||||||
| Retreived from: http://financials.morningstar.com/income-statement/is.html?t=GE | |||||||||||||||||||
| 5 Year Trend Graph | |||||||||||||||||||
| 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||
| Revenue | $ 147,300 | $ 147,359 | $ 146,045 | $ 148,589 | $ 117,386 | ||||||||||||||
| Expense | $ 44,379 | $ 43,135 | $ 42,637 | $ 40,567 | $ 17,831 | ||||||||||||||
| Gross Profit | $ 79,022 | $ 73,049 | $ 68,904 | $ 67,278 | $ 34,693 | ||||||||||||||
| The 5 Year Trend shows a drop in revenue, expenses, and gross profit between the years 2014 and 2015. The company had another massive drop in profitability just a few years before the period of stability from 2011 to 2014. Reflecting upon this historical trend, it may be determined that the company shall continue to follow this downward path and does not qualify for aquisition at this time. | |||||||||||||||||||
| 5 Year Histogram Chart | |||||||||||||||||||
| 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||
| Gross Profit | $ 79,022 | $ 73,049 | $ 68,904 | $ 67,278 | $ 34,693 | ||||||||||||||
| As the current data available from 2011 to 2015 show a steady decrease in gross profit for all five years, we can expect for the decline to continue. | |||||||||||||||||||
| Projections | |||||||||||||||||||
| Based on Average Decrease Rate According to Actual Data | |||||||||||||||||||
| YEAR | Gross Profit | Decrease in $ | Revenue | Decrease in $ | |||||||||||||||
| 2011 | $ 79,022 | $ 147,300 | |||||||||||||||||
| 2012 | $ 73,049 | $ 5,973 | $ 147,359 | $ (59) | |||||||||||||||
| 2013 | $ 68,904 | $ 4,145 | $ 146,045 | $ 1,314 | |||||||||||||||
| 2014 | $ 67,278 | $ 1,626 | $ 148,589 | $ (2,544) | |||||||||||||||
| 2015 | $ 34,693 | $ 32,585 | $ 117,386 | $ 31,203 | |||||||||||||||
| Average | $ 64,589 | $ 11,082 | $ 7,479 | ||||||||||||||||
| Discount Rate | 12% | ||||||||||||||||||
| YEAR | Year # | Cash Flow | Present Value | ||||||||||||||||
| 2016 | 0 | $ 23,611 | $ 23,611 | ||||||||||||||||
| 2017 | 1 | $ 12,529 | $ 11,186 | ||||||||||||||||
| 2018 | 2 | $ 1,446 | $ 1,153 | ||||||||||||||||
| 2019 | 3 | $ (9,636) | $ (6,859) | ||||||||||||||||
| 2020 | 4 | $ (20,718) | $ (13,167) | ||||||||||||||||
| NPV | $ 15,924 | ||||||||||||||||||
| IRR | -6% | ||||||||||||||||||
| 5 Year Projection Histogram Chart | |||||||||||||||||||
| 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||
| Cash Flow | $ 23,611 | $ 12,529 | $ 1,446 | $ (9,636) | $ (20,718) | ||||||||||||||
| Income | $ 109,908 | $ 102,429 | $ 94,951 | $ 87,472 | $ 79,994 | ||||||||||||||
| With a decreasing present value from year to year and a negative internal rate of return, we must assume that General Eectric will not recover from their downturn over the next five years. Therefore, it shall not be considered for acquisition. | |||||||||||||||||||
| Projections | |||||||||||||||||||
| Based on the following Predicted Parameters: | |||||||||||||||||||
| Revenues Increase Annually | 8% | ||||||||||||||||||
| Expenses Increase Annually | 10% | ||||||||||||||||||
| Tax Rate | 25% | ||||||||||||||||||
| Discount Rate | 10% | ||||||||||||||||||
| Historical 2011-2015 | |||||||||||||||||||
| YEAR | Expense | Revenue | |||||||||||||||||
| 2011 | $ 44,379 | $ 147,300 | |||||||||||||||||
| 2012 | $ 43,135 | $ 147,359 | |||||||||||||||||
| 2013 | $ 42,637 | $ 146,045 | |||||||||||||||||
| 2014 | $ 40,567 | $ 148,589 | |||||||||||||||||
| 2015 | $ 17,831 | $ 117,386 | |||||||||||||||||
| Projected 2016-2020 | |||||||||||||||||||
| YEAR | Expense | Revenue | |||||||||||||||||
| 2016 | $ 19,614 | $ 126,777 | |||||||||||||||||
| 2017 | $ 21,576 | $ 136,919 | |||||||||||||||||
| 2018 | $ 23,733 | $ 147,873 | |||||||||||||||||
| 2019 | $ 26,106 | $ 159,702 | |||||||||||||||||
| 2020 | $ 28,717 | $ 172,479 | |||||||||||||||||
| 5 Year Projection Histogram Chart | |||||||||||||||||||
| 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||
| Cash Flow | $ 107,163 | $ 115,344 | $ 124,139 | $ 133,596 | $ 143,762 | ||||||||||||||
| Income | $ 126,777 | $ 136,919 | $ 147,873 | $ 159,702 | $ 172,479 | ||||||||||||||
| Expense | $ 19,614 | $ 21,576 | $ 23,733 | $ 26,106 | $ 28,717 | ||||||||||||||
| Based on the prediction of a turnaround over the next five years in which General Electric will expect to see an increase of 8% of annual revenues and an increase of 10% of annual expenses, the company is projected to bounce back and show major profitabilit in the near future. Though the expense increase rate is more than the revenue increase rate, costs are far less than income and will not inhibit annual gross profits from rising. Therefore, it is recommended that General Electric be acquired immediately. | |||||||||||||||||||
10 years ago
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