'Yet some financial analysts are still fretting that...'

Question

Hi,Please have a look at this:Yet some financial analysts are still fretting that GE Capital’s portfolio may contain more nasty surprises. They point out that the business does not mark many of its assets to their market price—a practice that has blown huge holes in the finances of many big banks=&gt; What does the bold part mean? Does it mean that GE Capital's portfolio is not transparent (the company doesn't make known of it to the public), and so people distrust them (like the case of many banks)?Many thanks,Nessie

CalifJim · Accepted Answer

You should be asking this question on a forum for Accounting, Business, or Economics!

Does it mean that GE Capital's portfolio is not transparent (the company doesn't make known of it to the public), and so people distrust them (like the case of many banks)?No. Absolutely not! It has nothing to do with transparency.

As I understand it (and be sure to check with a few experts in accounting before accepting this in its entirety), GE is assessing the value of many of its assets on the basis of something other than what the assets would be worth in the marketplace if they were to sell them immediately -- perhaps on the basis of what these assets cost them when they bought them in the past. That is, GE does not "mark to market". If the market price is now much lower than the original amount that GE bought them at, their accounting documents are showing the assets at much higher values than they truly represent in today's weak economy. Such practices, says your quote, have caused a lot of problems for banks, so people think it might create the same kinds of problems for a corporation like GE.

See http://en.wikipedia.org/wiki/Mark-to-market and be sure to click on "financial instruments" to find out the categories of assets that these accounting principles apply to.

CJ

Nessie000 · Answer

Thank you very much, CJ

Things are very clear now

I think you're right that I should ask such questions in a forum for economics (I'm learning business English, you know), but I wonder if in such forums where people discuss economics-related matters, my question about its meaning may not be very suitable. Anyway do you know any sites of that kind? If you do, please tell me.
Thanks a lot one more time

Nessie.

'Yet some financial analysts are still fretting that...'

Top answer

Get the Weekly English Kit 📬