Question

What elements comprise General Motor's capital structure? What is the history on General Motor's growth? Look up the beta for General Motor's stock. How does General Motor's stock compare to the market? Is it high, average, or low risk? Why? How do you feel about the risk level of General Motor?

Answer 1

a)

		2017	2016
DEBT	Postretirement benefits other than pensions (Note 16)	5,998	5,803
	Pensions (Note 16)	13,746	15,264
	Other liabilities (Note 13)	12,394	12,415
	Non-current liabilities held for sale (Note 3)	0	7,626
	Total non-current liabilities	99,392	92,434
EQUITY	Common stock, $0.01 par value	14	15
	Additional paid-in capital	25,371	26,983
	Retained earnings	17,627	26,168
	Accumulated other comprehensive loss	-8,011	-9,330
	Total stockholders’ equity	35,001	43,836

(Source: SEC 10K Filings)

       Capital Structure = Debt /Equity

                  2017 = 99392/35001 = 2.83

                  2017 = 92434/ 43836 = 2.10

b) Growth Rate History of General Motor:

    

Sales - 5Yr. Growth rate	2.06
EPS - 5 Yr. Growth Rate	5.57
Capital Spending- 5 Yr. Growth Rate	32.71

(Source: Reuters Financial Database)

c) Beta of General Motor’s Stock:

          Beta of General Motors = 1.58

(Source: Reuters Financial Database)

d)

Value of Beta shoes that General Motor’s stock is more volatile as compare to the market. Stock of General Motor’s is 58% more volatile than market. As the stock price is more volatile risk also will be high.

(Stock with Beta 1 means price of stock moves with the market and Beta less than 1 mean stock prices is less volatile than market.)