Check out my latest Danger Zone interview with Chuck Jaffe of MarketWatch.com.
General Electric (GE) is in the DangerZone today.
When digging through the company’s latest annual report, I found a surprisingly large amount of non-recurring income items that caused GE’s expenses to be understated.
GE is not doing anything illegal or, for that matter, highly unusual. However, including non-recurring income items in operating expense line items like cost of sales, SGA and depreciation is misleading. This practice is misleading because it leads investors to believe that the operating income of the company is much higher than it really is after removing the non-recurring income from the expenses.