GM Financial Overview Essay - 1482 Words

GM Financial Overview Introduction The General Motors Corporation is a multifaceted company but its primary function is the manufacturing of automobiles and light trucks (SIC 3711). The General Motors stock is listed on the New York Stock Exchange and has approximately 1,426,592,046 outstanding shares on the marketplace, as of 10/14/2001. It is headquartered in Detroit Michigan with offices around the world. General Motors has many other operations besides automobile manufacturing including: General Motors Acceptance Corporation Financial Services, Hughes Electronics Corporation, and the GM Locomotive Group. (Disclosure.com) Financial Statement Analysis Overall, General Motors has had five profitable years with†¦show more content†¦The advantages of debt financing are that: bond investors are generally willing to accept a lower rate of return as compared to equity investors, the debt interest is tax deductible, and bond investors do not have voting rights on company issues. (Anthony 243) General Motors’ times interest earned ratio has generally stayed on course except for 1998. This shows that GM needs strong sales volumes to pay its on its liabilities due to the low profit margin. If a long-term decline in worldwide auto sales occurs, GM may have difficulty paying on its debt. In February 1998, GM announced a four billion dollar stock buyback program to decrease the number of outstanding shares and lower the amount of dividend payments. This corporate action was completed in December 1999 and they used over 2.6 billion dollars in cash to finalize the program in 1999.(GM 1999 77) This action shows that GM is committed to primarily issuing new debt to finance any capital needs. The one benefit of this action is the amount of dividends that GM will have to pay out to the current shareholders. In 1998, GM had to pay out 47% of its earnings to keep its fixed dividend policy of $2.00 for the year. 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