"Your opinion was more correct than mine in the light of what happened in 2008"
Well, I regard that as a compliment and a pretty rare event, historically speaking, Spekulatius !!
When it comes to the world of Banking & Finance I'd say that there are very few on the SI boards that can match you in that department.
I would also say that your following statement is certainly the way GE should go. If Jeff Immelt is on Twitter, or such like, maybe we should send him your suggestion ....
"My opinion is that GE should split it's finance part into those that are related to it's industrial business (leasing etc) and the part that is not. The unrelated part should be sold or spun off, more likely it would be the latter, because of it's size that make it big to swallow.
I would imagine that GE could probably "sweeten their deals" if they could offer the purchasers of their products favourable, in-house financial arrangements.
With regard to what GE was entering and reporting in their Annual Income Statements, we had the situation where their "overall businesses" had 'Interest Expenses' of the order of $19.3bil., $23.8bil. and $26.2bil. in the years 2006, 2007 and 2008 respectively.
As we know, Interest Expense appears above Pretax Income on the Income Statement and therefore reduces the amount to be taxed, which, of course, was to the benefit of GE.
In addition that 'Interest Expense' also reduced GE's relative Bottom Line, which meant that there was less Net Revenue available from which Dividends to shareholders could be paid.
Back in 2008 GE was only paying tax of about $(1.05/19.14)bil.x100 = 5.5%.
In 2012 they paid $(2.50/17.40)bil.x100 = 14%
In 2008 their Pretax Income/EBIT was 19141/45350 = 42%.
In 2012 their Pretax Income/EBIT was 17406/29914 = 58%.
So it seems that in recent times the effect of Interest Expense is having less of a negative effect on Revenue compared to previously. |
