Finance Case Study

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Students with ambitions to be involved in the field of mainstream finance know that their professors want them to develop and learn a lot. A finance case study as well as financial ratio analysis is a common type of tasks in finance textbooks. Students learn how to make a summary of the key information and assess the financial health of the company on the basis of its financial statements. In the present-day world, it is possible to search for any data online. Looking for finance case study help on the Internet, students can get an easy access to various databases and make sure that they learn effectively to contribute their achievements into their future career.

Financial Statements: What Are They?

It is a must for the companies to make records of what they do and which state they are at during a month, year, or some other period. They do that in financial statements. In analyzing a finance case study, it is possible to conclude that the strengths and financial performance of the companies are seen in their financial statements.

You can get a financial analysis case study example to see how to handle such assignments in a proper way. First of all, you have to get to know about all the peculiar features of the basic financial statements to gain an insight into a three-statement model. They are: balance sheet, income statement, and statement of the cash flow. Learning how to deal with a case study of finance, you need the knowledge and skills of an analyst to make professional assessment of the company liquidity and profitability.

It is complicated to handle a case study in finance. To make it easier, we suggest looking at some effective General Electric examples to get familiar with the principles of financial statements and profound analysis of the accounts.

Finance Case Study Example

Over the past decades, General Electric (GE) has experienced revolutionary improvements, especially in the stocks markets. For instance, the price-to-earnings ratio of the firm has risen from 7.0 to 16.0, as well as its growth superseding that of S&P 500 by 172%. Most of the changes have taken place under the strategic leadership of Jack Welch and the improvements are largely attributed to him. The CEO believes in removing bureaucracy and simplifying processes for the employees to enhance performance. In this analysis, the strategic management changes and measures that Welch has put in place at GE as well as their impact on the organization are investigated.

Case Study Questions

Question 1

According to Welch, for a large organization to be effective, it is necessary to have simple structure. This requires that the people have personal and intellectual self-confidence. Insecurity among managers has the tendency of causing complexities with nervousness and convolution in planning that can be seen in the slides they present depicting all they know. Self-confidence ensures the leader is clear and precise in stating their goals for the organization in a fast way. However, the CEO maintains that simplicity does not mean easiness. In his vision, the self-confidence is built through critical thinking that he promotes among the 300,000 employees who work for GE.

In particular, Welch suggests that every employee must be given an opportunity to win as a way of building their self-confidence. Firstly, to promote the winning spirit, the CEO has created the organizational strategy that is characterized by minimum bureaucracy. Based on the rationale by Welch, the previous management structure at GE was outdated as it promoted the calculated decisions to smoothly uplift the company. Hence, he got rid of the severe bureaucratic structure to allow the company’s employees to make their own decisions without the need for complex procedures, involving writing down endless reports in upper levels of management. With this approach, Welch implements a Holacracy model which promotes self-management and self-organization for employees.

Secondly, he has reduced the layers of management in the organization to enhance communication. Welch sees management layers as the organization’s way of masking mediocrity and hiding weaknesses. This method, as he states, overburdens executives and reduces their tendency to manage people and deal with trivia. Instead of the maximum 6 to 7 direct reports, a manager was expected to have, Welch requires them to have 10 to 15. In this way, the employees can grow their abilities since they are not frequently disturbed. Welch also reduces the number of corporate staff. In addition, he cuts groups and sectors to improve direct communication with the CEO. The leader further implements a reward system to encourage those who excel and make significant contributions to the company while leaving the failures alone.

Question 2

Although Welch sees his grand structure as a simple one since it sufficiently eliminates bureaucracy and allows employees to grow, it presents several ethical dilemmas. Firstly, in this structure, the managers have many employees to manage which could easily cause struggling work relationship. It may be hard for some employees to misuse the minimal supervision or just work as it is required. Secondly, due to that the manager has minimum knowledge of the employees, their responsibility and accountability are hard to manage. This situation leads to an ethical dilemma of choosing between holding accountable the entire workforce for mistakes committed by several individuals or making everyone responsible for their actions. Thirdly, the flat reward system could also contribute to an ethical dilemma since employees are compensated equally regardless of their contribution. Employees may face difficulties in choosing between just doing their primary roles or going the extra mile to benefit the organization because such a choice has no impact on their earnings. For example, an employee may feel guilty for not exploiting their full potential to benefit their organization. At the same time, they may feel that doing more for their firm is useless and a waste of energy since their efforts remain unnoticed.

Question 3

One of the most important resources at the GE that Welch has created is work-out. This involves a radical strategy of discussing and solving challenges by working with managers. Work-out enhances mental training of participants, problem-solving, as well as the elimination of unnecessary work form employees. This resource is unique to Welch and hard to copy since not many companies can allow the procedure where managers discuss issues that the owner is unaware of and respond to them appropriately. It is also an exhausting process that does not follow typical business procedures and takes time to be completely finished.

Another unique resource for GE under Welch is what the organization calls the “best practice.” Under this resource, GE studies the practices of exemplary companies that could be emulated and then shares the information from the entire research. The organizations acquire much information from the study and improve their processes. Carrying out such a process is hard for other organizations to copy because it involves building trust with competitors.

There is also the resource of “boundary-less intergraded diversity” where suppliers are the part of the organization and make their visions and mission identical. This strategy makes domestic and foreign suppliers identical and ignores important labels, such as hourly, salaried and management ones, to bring together the leveled people. The introduced approach allows for the transfer of ideas across the company. Most organizations are unwilling to outdo their management labels and make people the same which make it hard to adopt the strategy. Finally, there is the model resource of “simplicity” that denotes the easiness of carrying out business. This simplicity of the GE is high enough to allow other companies to respond and make the necessary changes in their structure. It looks like a leisure-fair type of organization that does not allow the management to take its typical structure, power, and roles.

Question 4

As he was taking office, Jack Welch stated that,

Ten years from now, we want magazines to write about GE as a place where people have the freedom to be creative, a place that brings out the best in everybody. An open, fair place that people have a sense that what they do matters, and where the sense of accomplishment rewarded in both the pocketbook and the soul. That will be our report card”

Considering the transformations in the company, it is provable that Welch has achieved excellent grades in his performance with regard to the above statement. GE is a place that promotes innovativeness and freedom among its staff members. In terms of the development of human capital, GE is the place where careers are built and promoted. This factor can be shown by an extremely low rate of employee turnover and respect by the organization management. The company also promotes autonomy and independence of groups and individuals hence leveraging the best in them. The working environment in the organization value recognizes success without undue reprimand for failure. Through this environment, employees are encouraged to try without the fear of failure or undue pressure from the management. By means of these structures, GE remains the best place to work and develop one’s carrier and talent.

Conclusion

Based on the analysis, the revolutionary changes and improvement in GE stock market and other areas of performance are attributable to Jack Welch’s strategic management capability. The CEO has reduced bureaucracy, encouraged simplicity, as well as modeled several resources to enhance GE’s competitiveness. A Holacracy model, which emphasizes self-management and self-organization, embodies the key features of GE under Welch’s leadership. However, the models and strategies present several ethical dilemmas for employees even though such problems have not been detected in light of the continued excellent performance.

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