Risk Profile Analysis, Firm's Value Analysis, and Review of Company Projects

Undertaking a Risk Profile Analysis of General Electric Co.

1. Undertake a Risk Profile Analysis of General Electric Co. over the last (at least) 8 years. More specifically, using both accounting and market-based risk measures, estimate and explain the meaning, significance and sources of the key risks facing the company.                                           

This analysis must cover the following lines of investigation:

i) Analysis of sales growth rate and its forecast for the next 2-3 years (clearly identifying the assumptions behind the forecast).

ii) Analysis of firm’s business risk (operating profit margin, operating leverage, asset turnover and any other ratio linked to the business risk of the company).

iii) Analysis of firm’s financial risk (debt ratio, financial leverage, capital structure).

iv) Analysis of the systematic (market) risk of the company over the last 5 years.

v) Analysis of Return on Assets and Return on Equity and highlighting the drivers behind any change in these ratios.

vi) In the light of above analysis, what sort of actions management should take to manage the key risks.

Students are expected to undertake trend and comparative analysis of the key ratios that highlight any aspect of risk.

2. The analysis of firm’s value using;                           

a) Net Asset Value Approach

b) The Dividend Valuation Model

c) The Price/Earnings Ratio approach

d) Cash flows-based Model           

Use the above models to forecast the Implied values of DPS and EPS. Are these forecasts in line with the industry trend?

3. Undertake a detailed review of the projects/acquisitions/mergers by the company in the last ten years. More specifically, you should be analysing the following questions;

What was the need of that investment? What was the main objective behind that decision? What managers were trying to achieve? Did they achieve the desired results? Use some ratios that can establish the impact of that decision on company's performance. Analyse the impact of that investment on company’s growth rate, profit margins, profitability, risk and overall shareholder value.