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Table: What GE Watchers Want to Know


HOW REAL ARE THE COMPANY'S EARNINGS?

The best measure is operating cash flow, which tends to run in sync with earnings. GE makes most of its money from real products and services. Thanks to strong markets, however, pension income has provided an added boost in recent years.

HOW WILL GE POST BIG EARNINGS GAINS WHEN SALES ARE FLAT?

GE points to acquisitions, cost-cutting, and other productivity gains. But it needs a pickup in the short-cycle units to balance the coming plunge in gas-turbine orders. If the economy stays weak, that might not happen.

DOES THE COMPANY BUY ITS WAY TO GROWTH?

About 15% of GE's earnings growth came from acquisitions last year. But because these are one-time events, it has to gobble more companies each year to keep up the pace.

ARE OFF-BALANCE-SHEET ENTITIES A CAUSE FOR CONCERN?

Most experts say no. There is no employee participation or speculation in these vehicles, which are used mainly to securitize receivables and transfer risk. They can, however, help the company to time earnings.

IS GE IN DANGER OF LOSING ITS AAA CREDIT RATING?

Not likely despite its mammoth finance unit. High-quality businesses, strong cash flow, and conservative accounting make it a hit with ratings agencies. And GE would do almost anything to hold on to the grade, which keeps its cost of borrowing low.

DOES GE RELY ON JUST A FEW BUSINESSES FOR GROWTH?

In any given year, the answer is yes. Power Systems is this year's star. GE Capital typically accounts for 40% of earnings--a potential problem if the percentage grows much more. But GE says its mix is a strength, because units peak at different times.


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