GE 2011 Annual Report Download - page 142

140 GE 2011 ANNUAL REPORT
BACKLOG Unfi lled customer orders for products and product ser-
vices (12 months for product services).
BORROWING Financial liability (short or long-term) that obligates us
to repay cash or another fi nancial asset to another entity.
BORROWINGS AS A PERCENTAGE OF TOTAL CAPITAL INVESTED For GE,
the sum of borrowings and mandatorily redeemable preferred stock,
divided by the sum of borrowings, mandatorily redeemable preferred
stock, noncontrolling interests and total shareowners’ equity.
CASH EQUIVALENTS Highly liquid debt instruments with original
maturities of three months or less, such as commercial paper.
Typically included with cash for reporting purposes, unless desig-
nated as available-for-sale and included with investment securities.
CASH FLOW HEDGES Qualifying derivative instruments that we use
to protect ourselves against exposure to variability in future cash
fl ows. The exposure may be associated with an existing asset or
liability, or with a forecasted transaction. See “Hedge.”
COMMERCIAL PAPER Unsecured, unregistered promise to repay
borrowed funds in a specifi ed period ranging from overnight to
270 days.
COMPREHENSIVE INCOME The sum of Net Income and Other
Comprehensive Income. See “Other Comprehensive Income.”
DERIVATIVE INSTRUMENT A fi nancial instrument or contract with
another party (counterparty) that is designed to meet any of a
variety of risk management objectives, including those related to
fl uctuations in interest rates, currency exchange rates or commod-
ity prices. Options, forwards and swaps are the most common
derivative instruments we employ. See “Hedge.”
DISCONTINUED OPERATIONS Certain businesses we have sold or
committed to sell within the next year and therefore will no longer
be part of our ongoing operations. The net earnings, assets and
liabilities, and cash fl ows of such businesses are separately classi-
fi ed on our Statement of Earnings, Statement of Financial Position
and Statement of Cash Flows, respectively, for all periods presented.
EFFECTIVE TAX RATE Provision for income taxes as a percentage of
earnings from continuing operations before income taxes and
accounting changes. Does not represent cash paid for income
taxes in the current accounting period. Also referred to as “actual
tax rate” or “tax rate.”
ENDING NET INVESTMENT (ENI) is the total capital we have invested
in the fi nancial services business. It is the sum of short-term bor-
rowings, long-term borrowings and equity (excluding non control ling
interests) adjusted for unrealized gains and losses on investment
securities and hedging instruments. Alternatively, it is the amount
of assets of continuing operations less the amount of non-interest
bearing liabilities.
EQUIPMENT LEASED TO OTHERS Rental equipment we own that is
available to rent and is stated at cost less accumulated depreciation.
FAIR VALUE HEDGE Qualifying derivative instruments that we use to
reduce the risk of changes in the fair value of assets, liabilities or
certain types of fi rm commitments. Changes in the fair values of
derivative instruments that are designated and effective as fair value
hedges are recorded in earnings, but are offset by corresponding
changes in the fair values of the hedged items. See “Hedge.”
FINANCING RECEIVABLES Investment in contractual loans and
leases due from customers (not investment securities).
FORWARD CONTRACT Fixed price contract for purchase or sale of a
specifi ed quantity of a commodity, security, currency or other
fi nancial instrument with delivery and settlement at a specifi ed
future date. Commonly used as a hedging tool. See “Hedge.”
GOODWILL The premium paid for acquisition of a business.
Calculated as the purchase price less the fair value of net assets
acquired (net assets are identifi ed tangible and intangible
assets, less liabilities assumed).
GUARANTEED INVESTMENT CONTRACTS (GICS) Deposit-type prod-
ucts that guarantee a minimum rate of return, which may be fi xed
or fl oating.
HEDGE A technique designed to eliminate risk. Often refers to the
use of derivative fi nancial instruments to offset changes in interest
rates, currency exchange rates or commodity prices, although
many business positions are “naturally hedged”—for example,
funding a U.S. fi xed-rate investment with U.S. fi xed-rate borrowings
is a natural interest rate hedge.
INTANGIBLE ASSET A non-fi nancial asset lacking physical sub-
stance, such as goodwill, patents, licenses, trademarks and
customer relationships.
INTEREST RATE SWAP Agreement under which two counterparties
agree to exchange one type of interest rate cash fl ow for another.
In a typical arrangement, one party periodically will pay a fi xed
amount of interest, in exchange for which that party will receive
variable payments computed using a published index. See “Hedge.”
INVESTMENT SECURITIES Generally, an instrument that provides an
ownership position in a corporation (a stock), a creditor relationship
with a corporation or governmental body (a bond), rights to con-
tractual cash fl ows backed by pools of fi nancial assets or rights to
ownership such as those represented by options, subscription
rights and subscription warrants.
MATCH FUNDING A risk control policy that provides funding for a
particular fi nancial asset having the same currency, maturity and
interest rate characteristics as that asset. Match funding is exe-
cuted directly, by issuing debt, or synthetically, through a
combination of debt and derivative fi nancial instruments. For
example, when we lend at a fi xed interest rate in the U.S., we can
borrow those U.S. dollars either at a fi xed rate of interest or at a
fl oating rate executed concurrently with a pay-fi xed interest rate
swap. See “Hedge.”
MONETIZATION Sale of fi nancial assets to a third party for cash.
For example, we sell certain loans, credit card receivables and
trade receivables to third-party fi nancial buyers, typically provid-
ing at least some credit protection and often agreeing to provide
collection and processing services for a fee. Monetization nor-
mally results in gains on interest-bearing assets and losses on
non-interest bearing assets. See “Securitization” and “Variable
Interest Entity.”
NONCONTROLLING INTEREST Portion of shareowner’s equity in a
subsidiary that is not attributable to GE.
OPERATING PROFIT GE earnings from continuing operations before
interest and other fi nancial charges, income taxes and effects of
accounting changes.
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