GE 2012 Annual Report Download - page 146

144 GE 2012 ANNUAL REPORT
BACKLOG Unfilled customer orders for products and product
services (12 months for product services).
BORROWING Financial liability (short or long-term) that obligates us
to repay cash or another financial 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 flows. 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 specified 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 financial instrument or contract with
another party (counterparty) that is designed to meet any of a
variety of risk management objectives, including those related to
fluctuations 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 flows of such businesses are separately clas-
sified 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) The total capital we have invested in
the financial services business. It is the sum of short-term borrow-
ings, long-term borrowings and equity (excluding noncontrolling
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-inter-
est 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 firm 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 correspond-
ing 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 specified quantity of a commodity, security, currency or other
financial instrument with delivery and settlement at a specified
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 identified 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 fixed
or floating.
HEDGE A technique designed to eliminate risk. Often refers to the
use of derivative financial 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. fixed-rate investment with U.S. fixed-rate borrow-
ings is a natural interest rate hedge.
INTANGIBLE ASSET A non-financial asset lacking physical substance,
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 flow for another.
In a typical arrangement, one party periodically will pay a fixed
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 relation-
ship with a corporation or governmental body (a bond), rights to
contractual cash flows backed by pools of financial 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 financial asset having the same currency, maturity
and interest rate characteristics as that asset. Match funding is
executed directly, by issuing debt, or synthetically, through a
combination of debt and derivative financial instruments. For
example, when we lend at a fixed interest rate in the U.S., we can
borrow those U.S. dollars either at a fixed rate of interest or at a
floating rate executed concurrently with a pay-fixed interest rate
swap. See “Hedge.”
MONETIZATION Sale of financial assets to a third party for cash.
For example, we sell certain loans, credit card receivables and
trade receivables to third-party financial 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 shareowners’ equity in a
subsidiary that is not attributable to GE.
OPERATING PROFIT GE earnings from continuing operations
before interest and other financial charges, income taxes and
effects of accounting changes.
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