GE is a conglomerate. Their manufacturing side and their capital business operate as more or less independent entities. How is GE "taking advantage of their capital business to the detriment of shareholders", if this business is profitable and contributes substantially to their bottom line?!? This is just so wrong headed, it is hard for me to make any sense out of it at all.
None of the interest expense remains in the GE system, you boob. If that were the case, it would not be an expense.
Ok, imagine the following scenario. I own two businesses:
CP Industrial has revenue of $10 and expenses of $9, no debt, giving me $1 in profit.
CP Financial has revenue of $4 and interest expense of $3 on debt of $60, giving me $1 in profit.
I made $2. I have a lot of debt and 25% of my expenses are interest -- gosh, I would have made $5 if it wasn't for that debt! But double gosh, if it weren't for that debt, then CP Financial has no business and I make only $1! |
