KBM 16 Liquidität und Finanzierung (EN)

KBM 16 Liquidity and Financing

In this module, you will learn the fundamentals of liquidity analysis and credit assessment, as well as the distinction between external and internal financing. You will understand the significance of various collateral types and be familiar with alternative financing methods such as leasing and factoring.

You will be able to identify liquidity gaps in a timely manner, evaluate suitable financing sources, and select the financial instruments appropriate for your business.

Concepts and Background

Liquidity

The ability of a company to meet its short-term payment obligations. It is measured by the ratio of liquid assets to short-term liabilities.

Creditworthiness

The creditworthiness of a company or private individual, which assesses its ability to repay loans on time and in full. It is determined through credit reports and balance sheet analyses.

External Financing

The procurement of capital from external sources such as banks, suppliers, or investors. Examples include loans, supplier credits, or equity stakes.

Internal Financing

The self-financing by a company from its own resources, such as retained earnings or depreciation. It is less expensive but often available in smaller amounts.

Collateral

Objects or rights that serve as security for a creditor for the repayment of a loan. Examples include mortgages, guarantees, or retention of title.

Practical Steps

1. Create a liquidity plan for the next 12 months that takes all expected incoming and outgoing payments into account. This enables early detection of potential liquidity gaps.
2. Calculate the cash flow from operating activities to assess operational liquidity. Formula: Operating Cash Flow = Net Income + Depreciation - Increase in Current Assets.
3. Analyze your creditworthiness through self-assessment and, if necessary, obtain a credit report from SCHUFA. This helps with preparing loan applications.
4. Check the availability of external financing options such as overdraft facilities or loans from various banks and compare the terms and conditions.
5. Evaluate internal financing potential by analyzing retained earnings possibilities and depreciation policies.
6. Create a list of collateral for potential loans that can use existing real estate, machinery, or receivables as loan security.
7. Consider alternative financing forms such as leasing for investment goods or factoring to improve liquidity by selling receivables.

Common Pitfalls

Further Resources

• Unternehmensregister des Bundesanzeigers - Official credit reports
• SCHUFA Unternehmensbonität - Information on credit assessment
• BDW Liquiditätsplanung - Guide to liquidity planning for SMEs
• Bundesbank Leitfaden für KMU - Information on financing options
• IHK Finanzierungsberatung - Consulting services from Chambers of Industry and Commerce

Knowledge Check

Four questions for self-assessment. Click on each question to see the correct answer and explanation.

What is the primary metric for measuring a company's liquidity?

• A) Equity ratio
• B) Ratio of liquid assets to short-term liabilities
• C) Return on sales
• D) Inventory turnover

Correct Answer: B. Liquidity is directly measured by the ratio of liquid assets to short-term liabilities. The equity ratio measures financial stability, not liquidity. Return on sales and inventory turnover relate to operational efficiency.

Which of the following financing methods is classified as internal financing?

• A) Bank loan
• B) Supplier credit
• C) Retained earnings
• D) Equity capital

Correct Answer: C. Retained earnings is a form of internal financing where the company retains profits and does not distribute them. Bank loans, supplier credits, and equity capital all come from external sources and are therefore classified as external financing.

Which object typically serves as collateral for a loan?

• A) Business equipment
• B) Mortgage
• C) Customer invoices
• D) Trademark rights

Correct Answer: B. A mortgage is a classic form of collateral for loans, as it is established on a fixed asset (e.g., real estate). Business equipment, customer invoices, and trademark rights can also serve as collateral, but are less common and typical.

How is the operating cash flow from business activities calculated?

• A) Sales minus costs
• B) Net income plus depreciation
• C) Net income plus depreciation minus increase in current assets
• D) Liquidity ratio III minus short-term liabilities

Correct Answer: C. Operating cash flow is calculated as net income plus depreciation minus increase in current assets. Sales minus costs equals profit, not cash flow. Liquidity ratio III minus short-term liabilities is not a standard calculation for operating cash flow.