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General Electric Co. (GE)

Analysis of Income Taxes

High level of difficulty

Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Adjustments to Financial Statements: Removal of Deferred Taxes
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Income Tax Expense (Benefit)

General Electric Co., income tax expense (benefit), continuing operations

US$ in millions

	12 months ended	Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Current tax expense (benefit)
	Deferred tax expense (benefit) from temporary differences
	Provision (benefit) for income taxes

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

Item	Description	The company
Current tax expense (benefit)	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	General Electric Co.’s current tax expense (benefit) increased from 2016 to 2017 and from 2017 to 2018.
Deferred tax expense (benefit) from temporary differences	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	General Electric Co.’s deferred tax expense (benefit) from temporary differences declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Provision (benefit) for income taxes	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	General Electric Co.’s provision (benefit) for income taxes declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Effective Income Tax Rate (EITR)

General Electric Co., effective income tax rate (EITR) reconciliation

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	U.S. federal statutory income tax rate
	Tax on global activities including exports
	U.S. business credits
	Goodwill impairments
	All other, net
	Actual income tax rate, before Tax Cuts and Jobs Act enactment
	Tax Cuts and Jobs Act enactment
	Actual income tax rate

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

Item	Description	The company
Actual income tax rate, before Tax Cuts and Jobs Act enactment	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	General Electric Co.’s actual income tax rate, before Tax Cuts and Jobs Act enactment increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level.

Components of Deferred Tax Assets and Liabilities

General Electric Co., components of deferred tax assets and liabilities

US$ in millions

		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Principal pension plans
	Other non-current compensation and benefits
	Provision for expenses
	Retiree insurance plans
	Non-U.S. loss carryforwards
	U.S. credit carryforwards
	Contract assets
	Intangible assets
	Depreciation
	Other, net
	GE
	Operating leases
	Financing leases
	Energy investments
	Intangible assets
	U.S. credit carryforwards
	Insurance company loss reserves
	Non-U.S. loss carryforwards
	Other, net
	GE Capital
	Eliminations
	Net deferred income tax asset (liability)

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

Item	Description	The company
Net deferred income tax asset (liability)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	General Electric Co.’s net deferred income tax asset (liability) increased from 2016 to 2017 and from 2017 to 2018.

Deferred Tax Assets and Liabilities, Classification

General Electric Co., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Deferred income tax assets

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

Item	Description	The company
Deferred income tax assets	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	General Electric Co.’s deferred income tax assets increased from 2016 to 2017 and from 2017 to 2018.

Adjustments to Financial Statements: Removal of Deferred Taxes

General Electric Co., adjustments to financial statements

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Noncurrent deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Total GE Shareowners’ Equity
	Total GE shareowners’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Total GE shareowners’ equity (adjusted)
	Adjustment to Net Earnings (loss) Attributable To The Company
	Net earnings (loss) attributable to the Company (as reported)
	Add: Deferred income tax expense (benefit)
	Net earnings (loss) attributable to the Company (adjusted)

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

General Electric Co., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

General Electric Co., adjusted financial ratios

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

Financial ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	General Electric Co.’s adjusted net profit margin ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	General Electric Co.’s adjusted total asset turnover ratio improved from 2016 to 2017 and from 2017 to 2018.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	General Electric Co.’s adjusted financial leverage ratio increased from 2016 to 2017 and from 2017 to 2018.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	General Electric Co.’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	General Electric Co.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.

General Electric Co., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net earnings (loss) attributable to the Company
	Sales of goods and services
	Profitability Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net earnings (loss) attributable to the Company
	Sales of goods and services
	Profitability Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

2018 Calculations

¹ Net profit margin = 100 × Net earnings (loss) attributable to the Company ÷ Sales of goods and services
= 100 × hidden ÷ hidden = hidden

² Adjusted net profit margin = 100 × Adjusted net earnings (loss) attributable to the Company ÷ Sales of goods and services
= 100 × hidden ÷ hidden = hidden

Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	General Electric Co.’s adjusted net profit margin ratio deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Total Asset Turnover

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Sales of goods and services
	Total assets
	Activity Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Sales of goods and services
	Adjusted total assets
	Activity Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

2018 Calculations

¹ Total asset turnover = Sales of goods and services ÷ Total assets
= hidden ÷ hidden = hidden

² Adjusted total asset turnover = Sales of goods and services ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	General Electric Co.’s adjusted total asset turnover ratio improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Total GE shareowners’ equity
	Solvency Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted total GE shareowners’ equity
	Solvency Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

2018 Calculations

¹ Financial leverage = Total assets ÷ Total GE shareowners’ equity
= hidden ÷ hidden = hidden

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total GE shareowners’ equity
= hidden ÷ hidden = hidden

Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	General Electric Co.’s adjusted financial leverage ratio increased from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net earnings (loss) attributable to the Company
	Total GE shareowners’ equity
	Profitability Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net earnings (loss) attributable to the Company
	Adjusted total GE shareowners’ equity
	Profitability Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

2018 Calculations

¹ ROE = 100 × Net earnings (loss) attributable to the Company ÷ Total GE shareowners’ equity
= 100 × hidden ÷ hidden = hidden

² Adjusted ROE = 100 × Adjusted net earnings (loss) attributable to the Company ÷ Adjusted total GE shareowners’ equity
= 100 × hidden ÷ hidden = hidden

Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	General Electric Co.’s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net earnings (loss) attributable to the Company
	Total assets
	Profitability Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net earnings (loss) attributable to the Company
	Adjusted total assets
	Profitability Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

2018 Calculations

¹ ROA = 100 × Net earnings (loss) attributable to the Company ÷ Total assets
= 100 × hidden ÷ hidden = hidden

² Adjusted ROA = 100 × Adjusted net earnings (loss) attributable to the Company ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	General Electric Co.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.

	General Electric Co.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

	All companies
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality