Goldman Sachs 2013 Annual Report Download - page 91

Management’s Discussion and Analysis
We believe our credit ratings are primarily based on the
credit rating agencies’ assessment of:
‰our liquidity, market, credit and operational risk
management practices;
‰the level and variability of our earnings;
‰our capital base;
‰our franchise, reputation and management;
‰our corporate governance; and
‰the external operating environment, including the
assumed level of government support.
Certain of the firm’s derivatives have been transacted under
bilateral agreements with counterparties who may require
us to post collateral or terminate the transactions based on
changes in our credit ratings. We assess the impact of these
bilateral agreements by determining the collateral or
termination payments that would occur assuming a
downgrade by all rating agencies. A downgrade by any one
rating agency, depending on the agency’s relative ratings of
the firm at the time of the downgrade, may have an impact
which is comparable to the impact of a downgrade by all
rating agencies. We allocate a portion of our GCE to ensure
we would be able to make the additional collateral or
termination payments that may be required in the event of a
two-notch reduction in our long-term credit ratings, as well
as collateral that has not been called by counterparties, but
is available to them. The table below presents the additional
collateral or termination payments related to our net
derivative liabilities under bilateral agreements that could
have been called at the reporting date by counterparties in
the event of a one-notch and two-notch downgrade in our
credit ratings.
As of December
in millions 2013 2012
Additional collateral or termination
payments for a one-notch downgrade $ 911 $1,534
Additional collateral or termination
payments for a two-notch downgrade 2,989 2,500
Cash Flows
As a global financial institution, our cash flows are complex
and bear little relation to our net earnings and net assets.
Consequently, we believe that traditional cash flow analysis
is less meaningful in evaluating our liquidity position than
the excess liquidity and asset-liability management policies
described above. Cash flow analysis may, however, be
helpful in highlighting certain macro trends and strategic
initiatives in our businesses.
Year Ended December 2013. Our cash and cash
equivalents decreased by $11.54 billion to $61.13 billion at
the end of 2013. We generated $4.54 billion in net cash
from operating activities. We used net cash of
$16.08 billion for investing and financing activities,
primarily to fund loans held for investment and repurchases
of common stock.
Year Ended December 2012. Our cash and cash
equivalents increased by $16.66 billion to $72.67 billion at
the end of 2012. We generated $9.14 billion in net cash
from operating and investing activities. We generated
$7.52 billion in net cash from financing activities from an
increase in bank deposits, partially offset by net repayments
of unsecured and secured long-term borrowings.
Year Ended December 2011. Our cash and cash
equivalents increased by $16.22 billion to $56.01 billion at
the end of 2011. We generated $23.13 billion in net cash
from operating and investing activities. We used net cash of
$6.91 billion for financing activities, primarily for
repurchases of our Series G Preferred Stock and common
stock, partially offset by an increase in bank deposits.
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