1 Financial Management Flashcards
What is Financial Management?
-optimizing of asset management (Working & Investment Capital)
-optimizing asset financing (Capital Structure)
What are the goals of Financial Management?
–Increasing shareholder value
–Avoiding insolvency
What does the Cashflow Statement show?
-the ability of the company to generate cash flows from operations,
-the ability of the company to fulfill its obligations to the debtholders and shareholders, i.e., pay interest and dividends and repay debt,
-the source of funds of a company (cash flows from financing)
-the investments a company makes (cash flows from investing-> growing)
How does the Structure of the cash flow statement look like?
3 categories
-Cash Flow from operating activities (CFoperating)
-Cash Flow from investing activities (CFInvest)
-Cash Flow from financing activities (CFFinance)
How can you calculate the total Cash Flow?
=Operating Cash Flow + Investing Cash Flow + Financing cash Flow
What’s the task of the cash flow from financing activities?
To show the ability and need of the company to finance from outside investors.
Do you classify received dividends & interest payments as Operating or Financing Cash Flow?
Operating Cash Flow
Do you classify paid dividends & interest payments as Operating or Financing Cash Flow?
Financing Cash Flow
<p>Definition Free Cashflow</p>
<p>Free CF is the Cash Flow available to all capital providers after all operating expenses have been paid and necessary investments in working capital and fixed assets have been made.</p>
<p>(Summe aller Mittel, die dem UN nach allen Ausgaben frei zur Verfügung stehen, z.B. für Dividendenausschüttung)</p>
<p>Calculation Free Cashflow</p>
<p></p>
<p>Operating Cash Flow</p>
<p>-</p>
<p>Investing Cash Flow</p>
<p>=</p>
<p>Free Cash Flow</p>
<p>Usage of Free Cashflow</p>
<p></p>
<p>Is often used as an indicator of the firms ability to pay dividends to shareholders and interest payments to creditors</p>
<p>Definition Financial Analysis</p>
<p></p>
<p>Process of evaluating businesses, projects, budgets and other finance-related entities to determine their performance and suitability</p>
<p>What are the two types of analyses for insolvency prevention?</p>
<p>- solvency analysis (relates to long term liabilities)</p>
<p>- liquidity analysis (relates to evaluating short term liabilities)</p>
<p>Definition net debt (Netto-Finanzschulden)</p>
<p>Net debt shows a business’s overall financial situation and indebtedness</p>
<p></p>
<p>Calculation net debt</p>
<p></p>
<p>Short term debt</p>
<p>+</p>
<p>Long term debt</p>
<p>-</p>
<p>Cash</p>
<p>-</p>
<p>Financial assets</p>
<p>=</p>
<p>Net debt</p>
<p>Is a negative net debt good or bad?</p>
<p>- negative is good, because the firm can pay off the loans</p>
<p>- positive is bad</p>
Liquidity analysis: Current ratio – Formula
Current assets/current liabilities
Liquidity analysis: What does the current ratio measure?
Measures the degree to which current assets cover current liabilities
What’s the reference value for the current ratio?
Close to 2 (200%)
Liquidity analysis: Interest coverage – Formula
EBIT/Interest expenses
Liquidity analysis: What does the interest coverage measure?
Measures a firm’s ability to pay its interest expenses through its result from operations
Liquidity analysis: Whats the reference value for the interest coverage?
At least 1,5
-> otherwise illiquidity risks are high
Solvency Analysis: Debt-to-equity-ratio (leverage) – Formula
total debt/equity
Solvency Analysis: What does the debt-to-equity-ratio measure?
Measurs how well long term debt holders are protected by the equity of the company
Solvency Analysis: What’s the reference value for the debt-to-equity-ratio?
< 4
Solvency Analysis: Net-debt-to-ebitda-ratio – Formula
net debt/EBITDA
Solvency Analysis: What does the Net-debt-to-ebitda-ratio measure?
- Measures a firm’s ability to pay its debt through its operational cash flow.
- The ratio shows how many years it would take for a company to pay back its debt if net debt and EBITDA are held constant
(Wie lange braucht UN um Netto-Finanzschulden zurückzuzahlen)
Solvency Analysis: What’s the reference value for the net-debt-to-ebitda-ratio?
< 4
Solvency Analysis: Calculation EBITDA
U-Erlöse
- Materialaufwand
- Personalaufwand
- Abschreibungen
= EBIT
- Zinsen
- Steueraufwand
= Jahresüberschuss
EBIT \+ Abschreibung = EBITDA
