Pro Forma and Business Cycle Research Paper2

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Pro-Forma and Business Cycle Research Paper
FIN/375
, 2014
Pro-Forma and Business Cycle Research Paper
This report will compare the pro-forma financial statement of two companies: Bank of America and General Electric also-known as GE. It will describe and summarize the comparison of both organizations and their fiscal stability. It will also detail the typical business cycle of these two companies. Pro-Forma Financial of General Electric and Bank of America

General Electric and Bank of America are two companies in the US that are competing to increase their sales, as well as their income in order to increase profits. Both companies are very strong financially: GE is an agglomerates industry with a market capital of $259.56 billion and Bank of America one of the major financial institutions with a market capital of $183.25 billion. Both companies make an effort to improve their bottom figures in each financial year. Bank of America had some merging and restructuring expenses in 2008, but was still showing remarkable earnings. However in the latest first-quarter 2014 report, a net loss of $276 million was published. In 2014, GE decided to acquire the power and Grid business of Alstom. GE expects the deal to be accretive to earnings in the first year. (www.businesswire.com, 2014). Financial Viability and Ratio Analysis of General Electric

According to the GE third-quarter 2014 annual report, the organization is performing well and has experienced profit growth since 2013 in the following areas: operating earnings, revenues, industrial segment profits, industrial segment organic revenue, and growth market orders. In addition, new technologies sparked an increase in equipment orders. Likewise, the organization has a strategy in place that has created growth in services business. GE will continue to simplify operations and focus on the needs of its consumers. Furthermore, GE is continuing to gain approval to acquire Alstom Power and Grid businesses. This acquisition is expected to take place in 2015. The acquisition is expected to increase GE’s cost per share and it will help GE obtain its goal of receiving most of its earnings through industrial businesses. (GE Reports Third-Quarter 2014, 2013) A ratio analysis is a “quantitative analysis of information contained in a company’s financial statements. (Definition of Ratio Analysis, 2014) It is used to “evaluate various aspects of a company’s operating and financial performance such as its efficiency, liquidity, profitability and solvency” (Definition of Ratio Analysis, 2014). This is a great tool to calculate how the company is doing over a certain amount of time.

GE’s efficiency ratio for day’s inventory, for example, was 54.76, however in 2013, it was 77.36. Receivables turnover was another huge improvement from 2004, at 12.21, to 2013 at 6.81(General Electric Co, 2014). GE’s short term debt has decreased from 21.02% in 2004 to 13.24% in 2013 however the long term debt has increased, with 28.41% in 2004, and 36.97% in 2013. The current ratio has also improved with 2.39 in 2004, and 2.53 in 2013, this is a big win for GE! (General Electric Co, 2014) This shows that the company is more able to pay debts and short term obligations than when it first began (Current Ratio Definition, 2014). Financial Viability and Ratio Analysis of Bank of America

In order to know the financial health of an organization, it is imperative to know the organization's financial viability. We have looked at the financial viability for Bank of America and find it to be a viable company. We looked at Bank of America's Return on Investment (ROI) which is calculated by looking at Bank of America's yearly return compared to the total investment we need for a project. Bank of America's Revenue was 98,353 million with Net Income at 5,222 million for the year ending 2013. Total liabilities were 1,884,932 million with 2,123,613 million in total assets (Bank of America, 2014)....
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