Goldman Sachs 2000 Annual Report Download - page 38

Cash Flows
Our cash flows are primarily related to the operating and
financing activities undertaken in connection with our trad-
ing and market-making transactions.
Year Ended November 2000. Cash and cash equivalents
increased to $3.87 billion in 2000. Operating activities
provided cash of $11.14 billion. Cash of $3.66 billion was
used for investing activities, primarily for our combination
with SLK and purchases of technology-related equipment.
Cash of $6.66 billion was used for financing activities as
decreases in short-term borrowings and net repurchase
agreements were partially offset by proceeds from the net
issuances of long-term borrowings.
Year Ended November 1999. Cash and cash equivalents
increased to $3.06 billion in 1999. Cash of $12.59 billion was
used for operating activities, primarily to fund higher net
trading assets due to increased levels of business activity.
Cash of $654 million was used for investing activities, pri-
marily for the purchase of telecommunications and technol-
ogy-related equipment, leasehold improvements and the
acquisition of The Hull Group in September 1999. Financing
activities provided $13.46 billion of cash, reflecting an
increase in long-term borrowings and repurchase agree-
ments, and proceeds from the issuance of common stock.
Year Ended November 1998. Cash and cash equivalents
increased to $2.84 billion in 1998. Cash of $62 million was
provided by operating activities. Cash of $656 million was
used for investing activities, primarily for leasehold
improvements and the purchase of telecommunications and
technology-related equipment and certain financial instru-
ments. Financing activities provided $2.10 billion of cash,
reflecting an increase in the net issuance of long-term and
short-term borrowings, partially offset by a decrease in net
repurchase agreements, distributions to partners, cash
outflows related to partners’ capital allocated for income
taxes and potential withdrawals, and the termination of our
profit participation plans.
Liquidity
Management Oversight of Liquidity
Management believes that one of the most important issues
for a company in the financial services sector is access
to liquidity. Accordingly, Goldman Sachs has established
a comprehensive structure to oversee its liquidity and
funding policies.
The Finance Committee has responsibility for establishing
and assuring compliance with our asset and liability man-
agement policies and has oversight responsibility for man-
aging liquidity risk, the size and composition of our balance
sheet, and our credit ratings. See “—Risk Management—
Risk Management Structure” below for a further description
of the committees that participate in our risk management
process. The Finance Committee meets monthly, and more
often when necessary, to evaluate our liquidity position and
funding requirements.
Our Corporate Treasury Department manages the capital
structure, funding, liquidity, and relationships with creditors
and rating agencies on a global basis. The Corporate
Treasury Department works jointly with our global funding
desk in managing our borrowings. The global funding desk is
primarily responsible for our transactional short-term
funding activity.
Liquidity Policies
In order to maintain an appropriate level of liquidity,
management has implemented several liquidity policies
as outlined below.
Diversification of Funding Sources and Liquidity Planning.
Goldman Sachs seeks to maintain broad and diversified
funding sources globally. These diversified funding sources
include insurance companies, mutual funds, banks, bank
trust departments, corporations, individuals and other asset
managers. Management believes that Goldman Sachs’ rela-
tionships with its lenders are critical to its liquidity.
We access liquidity in a variety of markets in the United
States, Europe and Asia. We make extensive use of the
repurchase agreement and securities lending markets and
have raised debt publicly as well as in the private placement
and commercial paper markets, and through Eurobonds,
money broker loans, commodity-based financings, letters
of credit and promissory notes. We seek to structure our lia-
bilities to avoid significant amounts of debt coming due on
any one day or during any single week or year.
Asset Liquidity. Goldman Sachs maintains a highly liquid
balance sheet. Many of our assets are readily funded in the
repurchase agreement and securities lending markets,
which generally have proven to be a consistent source of
36 Goldman Sachs Annual Report 2000