GE 2008 Annual Report Download - page 109

ge 2008 annual report 107
OPERATING PROFIT GE earnings from continuing operations before
interest and other financial charges, income taxes and effects of
accounting changes.
OPTION The right, not the obligation, to execute a transaction at
a designated price, generally involving equity interests, interest
rates, currencies or commodities. See “Hedge.”
PREMIUM Rate that is charged under insurance/reinsurance
contracts.
PRODUCT SERVICES For purposes of the financial statement display
of sales and costs of sales in our Statement of Earnings, “goods” is
required by U.S. Securities and Exchange Commission regulations
to include all sales of tangible products, and “services” must include
all other sales, including broadcasting and other services activities.
In our Management’s Discussion and Analysis of Operations we
refer to sales of both spare parts (goods) and related services
as sales of “product services,” which is an important part of our
operations.
PRODUCT SERVICES AGREEMENTS Contractual commitments, with
multiple-year terms, to provide specified services for products in
our Energy Infrastructure and Technology Infrastructure installed
base —for example, monitoring, maintenance, service and spare
parts for a gas turbine/generator set installed in a customer’s
power plant.
PRODUCTIVITY The rate of increased output for a given level of
input, with both output and input measured in constant currency.
PROGRESS COLLECTIONS Payments received from customers as
deposits before the associated work is performed or product is
delivered.
QUALIFYING SPEs (QSPEs) These entities are a specific type of
Variable Interest Entity defined in SFAS 140, Transfers of Financial
Assets to a Qualifying Special Purpose Entity. The activities of a
QSPE are significantly limited and entirely specified in the legal
documents that established the entity. There also are significant
limitations on the types of assets and derivative instruments they
may hold and the types and extent of activities and decision-
making they may engage in.
REINSURANCE A form of insurance that insurance companies buy
for their own protection.
RETAINED INTEREST A portion of a transferred financial asset
retained by the transferor that provides rights to receive portions
of the cash inflows from that asset.
RETURN ON AVERAGE SHAREOWNERS’ EQUITY Earnings from con-
tinuing operations before accounting changes divided by average
total shareowners’ equity, excluding effects of discontinued oper-
ations (on an annual basis, calculated using a five-point average).
Average total shareowners’ equity, excluding effects of discon-
tinued operations, as of the end of each of the years in the
five-year period ended December 31, 2008, is described in the
Supplemental Information section.
RETURN ON AVERAGE TOTAL CAPITAL INVESTED For GE, earnings
from continuing operations before accounting changes plus the
sum of after-tax interest and other financial charges and minority
interest, divided by the sum of the averages of total shareowners’
equity (excluding effects of discontinued operations), borrowings,
mandatorily redeemable preferred stock and minority interest (on
an annual basis, calculated using a five-point average). Average
total shareowners’ equity, excluding effects of discontinued oper-
ations as of the end of each of the years in the five-year period
ended December 31, 2008, is described in the Supplemental
Information section.
SECURITIZATION A process whereby loans or other receivables are
packaged, underwritten and sold to investors. In a typical trans-
action, assets are sold to a special purpose entity, which purchases
the assets with cash raised through issuance of beneficial inter-
ests (usually debt instruments) to third-party investors. Whether
or not credit risk associated with the securitized assets is retained
by the seller depends on the structure of the securitization. See
“Monetization” and “Variable interest entity.”
SUBPRIME For purposes of GE Money related discussion, sub-
prime includes credit card, installment and revolving loans to
U.S. borrowers whose credit score is less than 660 based upon
GE Capital’s proprietary scoring models, which add various
qualitative and other factors to the base FICO credit score. FICO
credit scores are a widely accepted rating of individual consumer
creditworthiness.
TURNOVER Broadly based on the number of times that working
capital is replaced during a year. Current receivables turnover is
total sales divided by the five-point average balance of GE current
receivables. Inventory turnover is total sales divided by a five-point
average balance of inventories. See “Working capital.”
UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES Claims
reserves for events that have occurred, including both reported
and incurred-but-not-reported (IBNR) reserves, and the expenses
of settling such claims.
VARIABLE INTEREST ENTITY Entity defined by Financial Accounting
Standards Board Interpretation 46 (Revised), and that must be
consolidated by its primary beneficiary. A variable interest entity
has one or both of the following characteristics: (1) its equity at
risk is not sufficient to permit the entity to finance its activities
without additional subordinated financial support from other
parties, or (2) as a group, the equity investors lack one or more
of the following characteristics: (a) direct/indirect ability to make
decisions, (b) obligation to absorb expected losses, or (c) right to
receive expected residual returns.
WORKING CAPITAL Represents GE current receivables and inven-
tories, less GE accounts payable and progress collections.
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