SW 1-3 Flashcards
Financial Crisis:
Strategic Reasons (5)
(Internal Issues)
Misjudgment of future sales markets and procurement markets;
Wrong corporate strategy or unsatisfactory realization of such strategy;
Misinvestments (Product development; operating assets; real estate; acquisitions; foreign subsidiaries etc.);
Unsatisfactory corporate management (BOD, Management);
Intransparent corporate structures / inappropriate organizational structures
Financial Crisis:
Finanical Reasons (8)
(Internal Issues)
Drop in sales; unsatisfactory Cash Flow;
Bad debts / inappropriate level of reserves for bad debts;
Not enough provisions for risks;
Excessive investments (over-investing);
Excessive cost structures;
Excessive inventory levels; overstatements of inventories;
Thin equity base; non risk conform equity;
Misleading financial reporting.
Financial Crisis:
Operational Reasons:
(Internal Issues)
Corporate Culture; Management stile; «calculated optimism»
Missing management tools (intransparency);
Suboptimal operational structuring (unclear; risky; inefficient etc.)
Inappropriate risk management;
Under-qualified staff (issues with selection, education, personnel turnover);
Quality issues (products / services);
Delays in delivery.
Financial Crisis:
Operational Reasons: External Issues
Economic cycle
Technological changes
Market compression (competitors / substitutes);
Unforeseen events:
- loss of an important business relationship;
- insolvency of a client or a supplier
- drastic changes on raw material / energy / capital – markets
- exchange rates;
- economic shocks;
- trade barriers;
- loss of key personnel (know how).
Symptoms of a crisis
Strategic Crisis
- Lower order inflow / shrinking order books
- high infrastructure cost
- drop in sales
- price wars
- loss of market share
- over capacities
- low productivity
Symptoms of a crisis
Profitability Crisis
- higher deducations (Abzüge)
- lower operating margin
- unsatisfactory equity level
- low quality of costing
- droping EBITDA /EBIT
- escalating use of credit lines
- rising trade accounts payable (FLL)
- management / staff turnover up
- lack of ressources
Symptoms of a crisis:
Liquidity Crisis
- permanent full use of credit lines
- over-drawing credit lines (Überziehungskredit)
- inability to take deductions (Skonto)
- payment hold-up (Zahlungsaufschub)
- escalating need for information of creditors
How does the general crisis model look like?
What is an adverse balance sheet?
(adverse = negativ)
- if a company makes losses
- it eats away equity
Adverse Balance sheet: difference between open/concealed and genuine/ not genuine?
open/disclosed:
- the loss is fully visible on the face of the balance sheet
- there are no more components to offset the loss
- Genuine (echt)
- no reserve anymore
- you can’t make the B/S look nicer
- not Genuine
- you still have hidden reserve/ disclosed reserve
- as long as you can make the B/S look nicer it is NOT genuine
concealed/ undisclosed:
- the loss is not visible on the balance sheet
- the loss has been offset, f.e. through reservations
How does the position “equity” look?
Equity:
- Shareholder’s equity
- Reserve
* Legal reserve
- Capital reserve
- general legal reserve
- revaluations reserve
- reserve for own shares
* free reserve
* statutory reserve
* retained reserve
- Profit/ Loss
How do you calculate over-indebtedness?
Either:
Equity ./. loss
- > if positive: no over-indebtedness
- > if negative: over-indebted
Or:
Total liabilities ./. total assets
- > if negative: no over-indebtedness
- > if positive: over-indebted
Art. 725 OR, Adverse Balance sheet
Without legal implications:
assets fully cover debts and at least 50% of share capital and legal reserves
With legal implications (Art. 725 OR):
Abs. 1
assets fully cover debts but less than 50% of share capital and legal reserves
Abs. 2
assets no longer fully cover the debts
—> Art. 671, 3 OR: free reserves may always be used to offset losses, also general reserve is meant to absorb losses.
Which reserves can not be recorded against a loss?
(2)
- revalutation reserves
- reserves for own shares
Für was darf die allgemeine Reserve gemääs OR Art 671, 3
nur verwendet werden?
Die allgemeine Reserve darf (soweit sie die hälfte des AK nicht übersteigt) nur zur Deckung von Verlusten oder für Massnahmen verwendet werden, die geeignet sind, in Zeiten schlechten Geschäftsganges das unternehmen durchzuhalten (…)
Which 3 Scenarios for “Adverse BS” (Capital Loss) in short?
1. Assets fully cover debts and at least 50% of shareholders capital and legal reserves
2. assets fully cover debts but less than 50% of shareholders capital and legal reserves
–> BOD call in AGM
3. assets do no longer fully cover debt
–> interim F/S
What does restructuring mean? And how does the concept look of restructuring?
- restructuring = turnaround
- recovery of a financially stricken economy subject
- Private Person
- Corporation
What should you check before you start the restructuring process?
ability
- does the plan have a high probability of success?
worthiness
- expected financial expense in prop. to the chances of success/ expect. corporate value?
- existing personal prerequisites? (pers. Voraussetzungen)
- Management
- Board of Directors
- are the people motivated
a restructuring plan is successful if all interested parties work positively and constructively together.
-> Who are the key players?
How does the corporate analysis look like? (part of restructuring)
How does the claim enforcement (Betreibung) basic process look like?
There is a card for each process
Claim enforcement: Claim enforcement process
If court decision exist
- debtor can only defend himself by proving that he has paid the claim/ that claim falls under the statue of limiations/ has been deferred (wurde verschoben)
- definite approval for continuation by court -> creditor may request the continuation of the claim enforcement with the enforcement office
If a public document or a promissory note exists
- debtor may defend himself by establishing prima facie evidence that no such claim exist
- if judge follows the debtor’s arguments
- -> creditor has to sue the debtor in a seperate lawsuit
- if judge follows the creditor
- -> the debtor may appeal to the cantonal court (20 days period)
- -> sue for denial of claim
- if appeal is declined
- -> creditor may request the coninuation of the claim enforcement with the enforcement office
- creditor can request provisional continuation
- possible documents:
- signed delivery slip
- purchase contract
- signed loan agreement
- signed rental contract
- signed employment contract
No document is available
- creditor must sue for acceptance of the claim
- if judge follows the arguments of the creditor
- -> creditor may request the continuation of the claim enforcement with the enforcement office
1) Enforcement by seizure: decision by enforcement office based on legal provisions
2) enforcement by realization of security:done by enforcement office -> seizure document for creditor and debtor (seizure of salary)
3) enforcement by bankruptcy: debtor receives notice for bankruptcy
Claim enforcement: Claim enforcement process
-> enforcement by realization of security
- for all collaterized claims
Claim enforcement: Claim enforcement process
–> Enforcement by bankruptcy
Ordinary proceeding:
- how does the process look like?
- how does the collocation plan look like?
1. creditor call
- creditors are to report their claims within 1 month
2. 1st creditor reunion
- election of receivership and creditor committee
3. collocation plan by receivership
4. 2nd creditor reunion
- decides on realization of assets
5. distribution of funds according to distribution list
(Private Persons may declare bankruptcy -> however claims against them do not disappear -> cred. may open new enforcement at any time)
