K1 Flashcards
What are typical tasks of a financial officer?
1) Overall
- reduction of market risks (e.g. currency rates)
- analysis and reduction of illiquidity and solvency risk
2) Corporate Finance:
- long-term financing decisions
- debt financing
- equity financing
- capital structure
3) Investments:
- long term financial investments
- efficient portfolios
4) Structured FInance
- complex financial transactions
5) Asst Management
- working Capital Management
6)Corporate Tresury
- Short term financial planning and management
7) Financial Controlling:
Analysis financial and operational risk positions
What is Financial Management?
- optimising of asset managementt (Working and Investment Capital)
- optimising asset financing (capital Structure)
What are the goals of financial Management?
- increasing shareholder value
- avoiding insolvency
What are the reasons for insolvency? Do both need to occur?
- obligations cannot be paid - Illiquidity –> Liquidity position
- over-indebtedness (Equity <0) –> Solvency
- only one already causes insolvency
What does the Cashflow Statement show?
- the ability of the company to generate cash flows from operations
- the ability of the company to fulfil its obligations to the debt holders and shareholders (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 –> growth)
What is the goal of the cashflow statement?
Presentation and analysis of the change in de liquid funds of a company, including:
- Cash positions: physical cash, bank accounts, checks, etc.
- Cash equivalents: shot term securities
How does the structure of the cash flow statement look like
3 categories:
- Operating Cash Flow (CFO)
- Investing Cash Flow (CFI)
- Financing Cash Flow (CFF)
How can you calculate the total Cash Flow?
= CFO + CFI + CFF
How can a cash Flow be prepared?
Directly Forecasting Each transaction
-Used for Financial Planning
-Determine each transaction
-Evaluate if it is cash relevant
-If it is cash relevant, determine what kind of cash flow it is
Indirectly deriving it from balance sheet and income statement
-Used for Financial Analysis
-Take the (planned) balance sheet and income statement
-Determine all cash relevant revenues and expenses
-Determine all non-cash value changes on the balance sheet
What does the Cashflow from investing activities do?
-task is to show value of all cash outflows of company
-for long term investments and from selling non-current assets
What are the components of the Cash Flow from investing activities & give an example?
Comprises all cash inflows and outflows, which are connected with the investments into or divestment of non-current (Anlagevermögen) assets, such as…
-Property, plant and equipment
-Intangible assets
-Financial assets
Example
Purchase of a new machine for 100 in cash > Investment cash Flow = -100
How is the Cash Flow from investing activities calculated?
Cash inflows from the sale of long term non-current assets (PPE or intangible assets)
- Cash outflows for the purchase -„-
+ Cash inflows from the sale of long term financial assets such as bonds and stocks
- Cash outflows for the purchase -„-
= Cash Flow from investing activities
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.
What are the components of the financing cash flow?
All cash inflows and outflows for debt and equity
Examples Financing Cash Flow
- increase in share capital
- new bank loan
- issuance of bonds
- repayment of a bank loan
- payment for dividends
