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General Management > Other > Flashcards

Other Flashcards

1
Q

Define financial control

A

The process by which managers influence other members of the organization to implement the organization ́s strategies

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2
Q

What are the three repetition points for fixed assets?

A
  • Permanent use
  • Purchase price less depreciation
  • For some cases market value
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3
Q

What are the two repetition points for current assets?

A
  • Realized within short

* Lowest of purchase price, replacement price, and selling price

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4
Q

Which are the three dimensions of financial analysis?

A

Profitability
Financial position
Liquidity

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5
Q

Name three typical financial analysis situations

A

Credit analysis
Equity valuation
Strategic planning

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6
Q

Name three pros with EBITDA

A
  1. Measures profit and cash flow at the same time
  2. Is not influenced by the choice of depreciation method
  3. Better comparability between companies
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7
Q

Name three cons with EBITDA

A
  1. In sufficient matching of expenses overestimates the company’s performance
  2. Does not take into account the capital needed
  3. Is influenced by whether the assets are owned or rented
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8
Q

Name the three ratios that measure operating profitability

A

ROA
ROCE
RONA

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9
Q

Name the ratio that measures shareholder profitability

A

ROE

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10
Q

When do you use opening balances?

A

When forecasting profitability

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11
Q

When do you use average balances?

A

When measuring historical profitability

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12
Q

When do you use closing balances?

A

When measuring liquidity and financial position

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13
Q

What can you use to measure profitability?

A

Return ratios
Leverage formulas
DuPont formula

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14
Q

Name two ways to improve profitability

A 
Growth (organic or through acquisitions)
• New geographic markets
• New products and services
• New distributions chanels
• New customer segments
• Market share increase
• Acquisition
• Change prices
Improve margins
• Purchase from low cost suppliers
• Consolidate purchases
• Invest in equipment
• Close unprofitable businesses
• Decrease number of products/services
• Outsource
• Everyday efficiency improvement
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15
Q

Name four areas where you can improve capital efficiency

A 
Non-current assets
• Own or rent
• Internal efficient use
• External cooperation with customers and suppliers
• Sharing with competitors

Inventory
• Inventory analysis in segments
• Internal flows

Accounts receivable
• Customers should pay in time
• Control invoicing routines
• Negotiate credit times

Accounts payable
• Control payment routines
• Negotiate credit times

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16
Q

What determines operating risk?

A

Profit margin
• How stable are sales in the industry and for the company – price * quantity?
• Are costs fixed or variable? – Operating leverage
• How stable are input prices (goods, personnel, rents)?
• Can costs be forwarded to customers?

Turnover of assets
• How stable are sales in the industry and for the company?
• Are assets fixed or flexible?

17
Q

What determines financial risk?

A

Financial leverage
Cost of debt
Bankruptcy costs

18
Q

How can you approximate operating risk?

A

Potential instability of future ROCE (ROA, RONA)

19
Q

Simply put, what do liquidity ratios measure?

A

The ratios measures the company’s short term ability to pay its maturing obligations

20
Q

Name six ways to solve liquidity problems

A 
Borrow
New issue
Skip dividends
Sell fixed assets
Working capital (decrease credit time?)
Income statement (increase revenues & decrease costs)
21
Q

How is capital employed defined?

A

Total assets less non interest-bearing liabilities, including deferred tax liabilites

22
Q

How is Cash flow from operating activities defined?

A

Operating cash flow after interest received, interest and bank charges paid and after income taxes apid

23
Q

How is EBITDA defined?

A

Operating profit before financial items, taxes, depreciation, amortization and share incentive plan.

24
Q

How is Interest cover defined?

A

Operating profit plus interest income divided by interest expenses and charges.

25
Q

How is Net interest-bearing debt defined?

A

Interest-bearing debt excluding front fees minus cash and cash equivalents.

26
Q

How is Operating capital defined?

A

Totalt assets less cash and cash equivalents and non interest-bearing liabilities, including deferred tax liabilities.

27
Q

How is Return on capital employed defined?

A

Operating profit plus interest income divided by average capital employed.

28
Q

How is capital employed defined?

A

Operating profit divided by average operating capital.

29
Q

Which are the four steps of a fundamental credit analysis?

A
  1. Assessing the exposure at default
  2. Estimating probability of default
  3. Estimating probability of recovery
  4. Estimating the expected loss

General Management (24 decks)

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