" Based on the data retrieved and the projections made, the accounting division will proceed to the development of the consolidated statements for all of GM subsidies and the overall group. There are 24 consolidated statements, as follows: Discounted Operations; Asset Impairment; Investment in Nonconsolidated Affiliates; Marketable Securities; Variable Interest Entities; Finance Receivables and Securitization; Inventories; Equipment on Operating Leases; Income Taxes; Property - Net; Goodwill and Intangible Assets; Other Assets; Accrued Expenses, Other Liabilities and Deferred Income Taxes; Long-Term Debt and Loans Payable; Pensions and Other Postretirement Benefits; Commitments and Contingent Matters, Stockholders' Equity; Earnings per Share Attributable to Common Stocks; Derivative Financial Instruments and Risk Management; Fair Value of Financial Instruments; Stock Incentive Plans; Other Income; Segment Reporting and Subsequent Events.

Chapter II: Financial Accounting Analysis

General Motors is undergoing a significant crisis in the present, also there are significant elements to show that this is not necessarily a financial crisis, but rather an operational one, mainly related to the decrease of the brand's competitiveness on the market. This, accumulated with the current economic crisis, which marked a significant downturn in global demand, gradually created a serious cash flow problem for General Motors, which translated in the consideration of potentially filing for bankruptcy at some moment during 2009 (management reportedly noted that the company was unlikely to survive past 2009 under the current conditions).

In 2007, the cash flow values on the automotive part of the business were slightly higher than those in 2006, having increased with 3.26%. However, if we compared this with the increase from 2005 to 2006, it is insignificant. At the same time, the cash flow on the insurance and financial sectors, as well as on other related sector, has decreased from 2006 and even more so from 2005. Practically, with the cash flow figures that the cash flow statement shows for the 2007 Annual Report, the company no longer has a functional insurance and finance operation.

The conclusions targeting the cash flow statement are clearly stated in the Annual Report and they do reflect the reality on the ground. As such, the company is able to "meet our capital requirements, including the required funding of the UAW Attrition Program, and other funding needs over the short and medium-term, even in the event of further U.S. industry decline." However, for the medium and long-term, the survival of the company would depend on its capacity to abide by the turnaround plan proposed and by the resurgence of sales on its North American market.

In the meantime, with the economic crisis becoming more acute and with demand on a descending trend, the first part of the analysis has become doubtful and the company is most likely considering its short-term survival at this point, rather than its long-term ability to turnaround. Nevertheless, becoming more competitive on the market should essentially be the clue to the survival of General Motors. However, the company has been forced to cancel in 2008 a new investment program for its SUV platform, which means that the company will not be able to renew its automotive portfolio.

This is probably best explained with one of the asset management ratios, the inventory turnover ratio. The inventory turnover ratio can be used to calculate the ratio between the cost of goods sold and the average inventory, but can also be expressed as the volume of sales divided by the volume of inventory. In general, a low turnover means that the company has too high levels of inventory and that it is not generating enough sales as compared to these levels of inventory.

The inventory turnover ratio has decreased for General Motors from 2005 to 2007 by over 10.8%, which means that the company is producing much more than it can sell, which is risky both because of the additional costs that high levels of stocks involve and because the prices for cars could potentially decrease over the next period of time., especially with the current financial situation. At GM, there seems to be an unprofitable continuous mechanism that implies that workers need to produce because they cannot be fired (because of strong unions), but what they produce is no longer sufficiently demanded on the market.

In terms of the liquidity ratios, the current ratio, calculated as a ratio of the current assets value to the current liabilities value, was 3.21 in 2005, which shows a very prudent short-term financial policy, with the current asset value surpassing significantly the value of the short-term liabilities value. Nevertheless, this changed...

The value is not sufficiently conclusive to understand whether this occurred because the company has been accumulating short-term liabilities at a faster pace or because it has decided it needs to have a liquidity ratio closer to 1.
Liquidity ratios at GM - 2005-2007

In terms of the profitability ratios, a useful one is the basic earning power ratio, comparing the earnings and assets of the company. As we can see from the table below, the fluctuations for this ratio are great, with a 20% decrease from 2005 to 2006, followed by a 87.5% increase from 2006 to 2007, but the values remain at generally low levels.

Profitability ratios at GM - 2005-2007

As a final note for this part, the social factors seem to have a great impact on the activity and financial results at General Motors. The strong unions dictate part of the financial and operational decisions at GM. One good example in this sense was the 2007 GM strike, when 2 days of strike meant significant losses for the company, along with agreements with the workers that followed the crisis and that provided additional financial burdens for GM. All this is coming at a moment when the company most likely needs significant restructuring and laying people off in an effort to sustain its already affected cash flow.

Chapter III: Management Accounting Analysis

The specialized literature is filled with information on management accounting, but the most important thing to remember about the concept is that it refers to accounting operations applied by the managerial teams in making the best informed business decisions. In other words, the processes of management accounting refer to the usage of accounting information by managers in making the most adequate business decisions. A more professional definition of the concept is that offered by the Institute of Management Accountants. In their view, "Management accounting is the internal business building role of accounting and finance professionals who work inside organizations. These professionals are involved in designing and evaluating business processes, budgeting and forecasting, implementing and monitoring internal controls, and analyzing, synthesizing, and aggregating information -- "to help drive economic value. [...] Management accountants are valued business partners, directly supporting an organization's strategic goals. With a renewed emphasis on good internal controls and sound financial reporting, the role of the management accountant is more important than ever."

Otherwise put, management accounting refers to actually implementing the most adequate strategies that ensure that the organization reaches its goals. As opposed to public accounting, which basically refers to the audit of the already incurred operations, management accounting is more complex and its importance grows with every day. Also, the data used in the process of management accounting is often undisclosed to the public and the economist might find it rather challenging to conduct an analysis of the management accounting operations implemented by an economic agent. Another difference between management accounting and the traditional forms of accounting revolves around the timelines employed by each procedure. In this order of ideas, the traditional accounting methods generally analyze past events and record them. Management accounting on the other hand looks at the future: based on data on the past events, it develops and implements strategies in the present, with the aim of registering future gains. In addition, the traditional accounting methods have a more corrective and an audit function, based on the compliance with the legal accounting standards, whereas management accounting is more creative and also makes use of management concepts (resources, business objectives, competition and so on).

General Motors was among the first multinationals to implement the concepts of management accounting, with its incipient signs being present as far back as 1920. At this time, General Motors commenced to price its products at objective rates, based on the costs incurred in the manufacturing and distribution of their items, the results of the conducted market research or the desired levels of profitability. Also at this point, the managerial teams at GM began to develop objective budgets, create estimates and then readjust the financial statements and the future endeavor based on the emerged changes and retrieved results. All their actions were based on the yet undeveloped principles of strategic planning.

The usage of the management accounting principles was revealed in several aspects of the way General Motors conducted its operations throughout the years. In this line of thoughts, the…