GE 2010 Annual Report Download - page 136

134 GE 2010 ANNUAL REPORT
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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 pre-
ferred 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.
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 com-
modity prices. Options, forwards and swaps are the most
common derivative instruments we employ. See “Hedge.”
DISCONTINUED OPERATIONS Certain businesses we have sold or com-
mitted to sell within the next year and therefore will no longer be
part of our ongoing operations. The net earnings, assets and liabili-
ties, and cash flows of such businesses are separately classified 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-interest
bearing liabilities.
EQUIPMENT LEASED TO OTHERS Rental equipment we own that is avail-
able 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 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
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. Calcu-
lated 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 CONTRACT (GIC) Deposit-type product that
guarantees 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 inter-
est 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 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 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, sub-
scription rights and subscription warrants.
MANAGED RECEIVABLES Total receivable amounts on which we
continue to perform billing and collection activities, including
receivables that have been sold with and without credit recourse
and are no longer reported on our Statement of Financial Position.
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 providing at
least some credit protection and often agreeing to provide collec-
tion and processing services for a fee. Monetization normally
results in gains on interest-bearing assets and losses on