Politics and Reporting
- is inherently about evaluating a company
- based on different requirements different schemes have emerged
- IFRS, US GAAP, AT GAAP
- is mostly about trust in the evaluation of companies
Triangular Relationship
Equity
- Covering losses
- What owners and stock holders have contributed
Exceptions to triangular relationships
-
Depreciation, not in Cash Flow Statement
-
non-cash changes in provisions … Rückstellung
- pension schemes (after 10 years)
-
“dirty” changes to equity i.e. booked directly into equity
Value of Assets in Balance Sheet
- only in balance sheet the value of purchase
- not market value
Fair Value
- Market value may be used
- Cause of Financial Crisis 2008
- Inflation of Balance Sheet
- here not Inflation but just increasing numbers on Balance Sheet
- When sold at less than book value depreciation kills the company if severe enough
- Inflation of Balance Sheet
Financial Accounting
- How are things right now?
- Published to stakeholders and government bodies
Managerial Accounting
- Why are things like they are
- Not published → Secrets are in there
Finance Analysis
- FTX Crash due to no finance people being present in the company
Ratios
- e.g. EBIT
- information condensed into simple values
- better to compare business models instead of ratios
- seasonality (compare peak to peak, etc)
- Performance Measurement Systems
- communicate which ratios are used to assess performance → mitigating Communication Problems
- projections are not predictions
- Benchmarks, Benchmarks, Benchmarks
- industry leaders
- past 10 years
- other competitors
Supplier Loans
- hard time paying suppliers during peak times (seasonal)
- giving out a better/later payment scheme
- collect some 2% extra (reverse Skonto) (cheaper than bank)
- profit
Short Term Liquidity
- Working Capital - Money on the move
- One cannot calculate with these funds, Inventories, Interesting with Production Companies
Long Term Solvency
- all funds company has access to
- also loans and other outside capital
Profitability Ratios
- Return on Assets
- i.e. double sales should lead to double profit
- reaction: look at cost analysis, don’t fire people
- why is it? Not only: how is it?
- ROI
- when is my investment amortized