Has general electric conquered
Has general electric conqueredHas General Electric conquered the business cycle? According to the companies past three financial statements it appeared as if they have indeed done so. Looking at GE's 1996 Annual Report, Letter To Share Holders, the first phrase of the 14 page document was "In 1996, your Company had its best year ever." Companies such as GE spend millions if not billions of dollars per year to ensure they can include this nine-worded phrase in their Annual Report. Those few words affect the behavior of investors all over the world.
To understand why a corporation would "manage earnings" one must first understand the reason a corporation exists. The Corporation is an abstract entity which sole concern is to please its stockholders in every degree according to Prof. Saldana of Phl 205 (Business and Professional Ethics). Profit is the generating force behind all Corporations. A famous quote taken from J. D. Rockefeller (19th century Billionaire) states, "Let them eat cake!" Defined by many to explain his strict economic policies and ruthless elimination of business opponents it also reinforces the fact why Corporations must always do well. Understanding this concept explains why a conglomerate corporation such as General Electric would want to ensure that its figurers are in line with expectations because its financial future relies on it.
A CEO, in the case of GE, John F. Welch Jr. is faced with risk daily. It is his initial decision to change the direction of the Corporation whether for better or worst. The daily stock price and its fluctuations may reflect the amount of risk seen by investors however no matter how poorly a decision may be implemented the Corporation will always stand....
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