K2

Question 1

What’s the task of the cash flow from operating activites?

Answer 1

To show the ability of the company to generate liquid funds from its operating business, which are available for investments and payments for shareholders and debtholders.

Question 2

What are the components of the cash flow from operating activites?

Answer 2

Cash flows from all business activities, which are not investing or financing cash flows.

Question 3

Examples Financing Cash Flow

Answer 3

• cash inflows from the sale of products
• cash outflows from the purchase of raw materials and services
• payment of wages and salaries
• tax payments

Question 4

Definition Free Cashflow

Answer 4

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.

Question 5

Calculation Free Cashflow

Answer 5

OCF-ICF

Question 6

Definition Financial Analysis

Answer 6

Process of evaluating businesses, projects, budgets and other finance-related entities to determine their performance and suitability

Question 7

What is a financial manager of a firm doing?

Answer 7

Conducts analysis by focusing on the income statement, balance sheet and cash flow statement usually by creating ratios and calculation of standard terms to identify optimization potential

Question 8

When is a financial analysis being used?

Answer 8

Typically to analyze whether an entity is stable, solvent and liquid enough

Question 9

What are the two types of analyses for insolvency prevention?

Answer 9

• solvency analysis (relates to long term liabilities)
• liquidity analysis (relates to evaluating short term liabilities)

Question 10

Definition debt

Answer 10

Debt are all liabilities that are interest-bearing (Zinskosten)
For example: bank debt

Question 11

Which items are included in the total debt?

Answer 11

• issued loans
• issued bonds
• short term bank debt
• long term provisions

Question 12

Which items are excluded in the total debt?

Answer 12

Accounts payable and income tax payables are not interesting bearing
-> therefore they are not classified as debt

Question 13

Definition net debt (Netto-Finanzschulden)

Answer 13

Net debt shows a business’s overall financial situation and indebtedness

Question 14

Which items are included in the net debt?

Answer 14

All interest bearing positions
For example: short and long term debt

Question 15

Which items are excluded in the net debt?

Answer 15

All interest bearing positions
For example: short and long term debt

Question 16

Which items are excluded in the net debt?

Answer 16

Non-interest bearing positions

Question 17

Which items are being subtracted to get the net debt?

Answer 17

Financial assets and cash

Question 18

Why are the financial assets and cash are being subtracted for the net debt?

Answer 18

Because they are seen as highly liquid assets and can immediately reduce the indebtedness

Question 19

Calculation net debt

Answer 19

Short term debt + Long term debt - Cash - Financial assets = Net debt

Question 20

Is a negative net debt good or bad?

Answer 20

• negative is good, because the firm can pay off the loans
• positive is bad