Bachelor thesis financial crisis

Non-Borrowed reserves of Depository Institutions Figure 3:

Bachelor thesis financial crisis

Bachelor thesis financial crisis

Roles of Managers Figure 3: Classical Management Process Figure 4: Typical Process of a Crisis Figure 6: Net Working Capital Formula 2: Detailed Calculation of Working Capital Formula 3: Working Capital — Ratio or Formula 4: Calculation of Working Capital-Ratio as Management Quality QM Abstract The present thesis tries to figure out, if the Working Capital Management of German companies is reactive to changing interest rates for their refunding or if it is really a pro-active improvement since the beginning of the s as claimed by the literature.

After a theoretical definition of Working Capital, its functions, goals and its relationship to the management process, Working Capital will be set into a context of company crises to lead to the central object of investigation, the Global Financial Crisis.

The analysis of the data via SPSS will show, that the possibilities of refunding indeed influence this quality, whereby the intensity of the reactionary behaviour of the companies depends mainly on the object of cognition, which is in this thesis examined by the parameters size, age and industry sectors, so that the results could serve as a basis for further management research.

The Global Financial Crisis with its height at the end of and the beginning of had extensive consequences on the global economy and did not only extend to the financial sector.

Its intent was to increase the propensity to consume and the investment activities among European citizens and companies. In case that the actual predominant opinion17 that German companies practice their WCM pro-active is provable, the Financial Crisis and the easy money policy should only had small extraordinary effects on the WC-Ratio due to the strategic long-term orientated approach of WCM — even if it was particular hard during the crisis and particular easy after the crisis to refund companies.

On this basis, the research question is, whether the management of WC in Germany between and with every account date in this duration as the times of measurement was rather reactionary than pro-active. If the hypotheses of this thesis are provable that at first, the management intensified WCM during the crisis, because they had to do so to prevent a liquidity bottleneck, and secondly, neglected it afterwards, because the incentives of increasing profitability and shareholder value faded in the face of the low central rate, this thesis helps to evaluate the management more detailed and can be served as a foundation for additional examinations on how WCM in Germany can be improved and how German managements can focus on WCM increasingly.

In order to reach resistant results, it is mandatory to start this thesis with a literature review, showing and analysing the actual state of knowledge regarding the WCM, the Financial Crisis and also of company crises. In the end it will be possible to give a resistant conclusion regarding the research question of whether the management of WC was rather reactionary than pro-active.

Bachelor Thesis: The Global Financial Crisis of - Economics, Finance, Economic Policy - Stuvia

Furthermore the last chapter gives a forecast using a scenario of increasing central rates how big the effects of in sufficient WCM could be in the future.

In the second part, after shortly defining in the next part 2. The term WC in the financial sphere of a company is a generally accepted definition and can be viewed from two perspectives: From the cash-flow orientated, dynamic perception WC is considered as a circuit of liquid assets with focus on the period of time between outgoing and incoming payments.

The measurement method is the Cash Conversion Cycle18 which is often used to measure the effect of WCM on profitability of companies. This is primarily caused by the fact that the cash-flow orientated perception needs more information, is more dependent from other factors, is more short-term orientated and in addition partly needs internal data of companies as, for example, their operational goals, which is not readable in the balance sheet or the profit and loss account21 of an annual financial statement Nevertheless, the aims regarding WC, which will be described later, should be the same, and the analysis with the CCC can be viewed as a short-term instrument which indicates anyway the obvious results in the balance sheet so that the focus on the balance sheet orientated approach should not have major effects.

Bachelor thesis financial crisis

While the Gross WC is exactly the total sum of the current assets, the Net WC refers to the difference between the short-term assets and liabilities. Abbildung in dieser Leseprobe nicht enthalten Figure 1: The reason for this choice is due to the fact that the Gross WC does not have significance regarding the improvement or the worsening of WCM in companies, because it does not show the difference of the current assets to the current liabilities or at least the height of the current liabilities and is, above all, not often used as definition for WC in the literature.

Net Working Capital29 A classical defined optimum for the formula of WC does not exist, especially because the needs of liquidity and inventory, and the stock of liabilities and receivables depend on the industry sector. Generally, the WC has to be suitable for the industry sector and the size of each company and has to be, normally, above zero; however, every company may have an own optimal level of WC.

Nevertheless, until the s research was limited to single components of WC as receivables or inventory, and the first empirical research activities about the interdependencies of all components were executed not until the s, so that even with a relatively long discourse since then, for the term WC — as it is with many definitions in the economy — one valid explanation is not enforced until now, which has mainly two reasons: In a company only the balance sheet items are relevant for the formula, which can be influenced by the management, while in the scientific theory all short-term items with a maturity under one year are recognised.

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Bachelor Thesis: The Global Financial Crisis of - Economics, Finance, Economic Policy - Stuvia