1 Financial Management

Question 1

What is Financial Management?

Answer 1

-optimizing of asset management (Working & Investment Capital)
-optimizing asset financing (Capital Structure)

Question 2

What are the goals of Financial Management?

Answer 2

–Increasing shareholder value
–Avoiding insolvency

Question 3

What does the Cashflow Statement show?

Answer 3

-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)

Question 4

How does the Structure of the cash flow statement look like?

Answer 4

3 categories
-Cash Flow from operating activities (CFoperating)
-Cash Flow from investing activities (CFInvest)
-Cash Flow from financing activities (CFFinance)

Question 5

How can you calculate the total Cash Flow?

Answer 5

=Operating Cash Flow + Investing Cash Flow + Financing cash Flow

Question 6

What’s the task of the cash flow from financing activities?

Answer 6

To show the ability and need of the company to finance from outside investors.

Question 7

Do you classify received dividends & interest payments as Operating or Financing Cash Flow?

Answer 7

Operating Cash Flow

Question 8

Do you classify paid dividends & interest payments as Operating or Financing Cash Flow?

Answer 8

Financing Cash Flow

Question 9

<p>Definition Free Cashflow</p>

Answer 9

<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>

Question 10

<p>Calculation Free Cashflow</p>

Answer 10

<p></p>

<p>Operating Cash Flow</p>

<p>-</p>

<p>Investing Cash Flow</p>

<p>=</p>

<p>Free Cash Flow</p>

Question 11

<p>Usage of Free Cashflow</p>

<p></p>

Answer 11

<p>Is often used as an indicator of the firms ability to pay dividends to shareholders and interest payments to creditors</p>

Question 12

<p>Definition Financial Analysis</p>

<p></p>

Answer 12

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

Question 13

<p>What are the two types of analyses for insolvency prevention?</p>

Answer 13

<p>- solvency analysis (relates to long term liabilities)</p>

<p>- liquidity analysis (relates to evaluating short term liabilities)</p>

Question 14

<p>Definition net debt (Netto-Finanzschulden)</p>

Answer 14

<p>Net debt shows a business’s overall financial situation and indebtedness</p>

<p></p>

Question 15

<p>Calculation net debt</p>

Answer 15

<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>

Question 16

<p>Is a negative net debt good or bad?</p>

Answer 16

<p>- negative is good, because the firm can pay off the loans</p>

<p>- positive is bad</p>

Question 17

Liquidity analysis: Current ratio – Formula

Answer 17

Current assets/current liabilities

Question 18

Liquidity analysis: What does the current ratio measure?

Answer 18

Measures the degree to which current assets cover current liabilities
What’s the reference value for the current ratio?
Close to 2 (200%)

Question 19

Liquidity analysis: Interest coverage – Formula

Answer 19

EBIT/Interest expenses

Question 20

Liquidity analysis: What does the interest coverage measure?

Answer 20

Measures a firm’s ability to pay its interest expenses through its result from operations

Question 21

Liquidity analysis: Whats the reference value for the interest coverage?

Answer 21

At least 1,5
-> otherwise illiquidity risks are high

Question 22

Solvency Analysis: Debt-to-equity-ratio (leverage) – Formula

Answer 22

total debt/equity

Question 23

Solvency Analysis: What does the debt-to-equity-ratio measure?

Answer 23

Measurs how well long term debt holders are protected by the equity of the company

Question 24

Solvency Analysis: What’s the reference value for the debt-to-equity-ratio?

Answer 24

< 4

Question 25

Solvency Analysis: Net-debt-to-ebitda-ratio – Formula

Answer 25

net debt/EBITDA

Question 26

Solvency Analysis: What does the Net-debt-to-ebitda-ratio measure?

Answer 26

• 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)

Question 27

Solvency Analysis: What’s the reference value for the net-debt-to-ebitda-ratio?

Answer 27

< 4

Question 28

Solvency Analysis: Calculation EBITDA

Answer 28

U-Erlöse
- Materialaufwand
- Personalaufwand
- Abschreibungen
= EBIT
- Zinsen
- Steueraufwand
= Jahresüberschuss

EBIT \+	Abschreibung =	EBITDA