Mercedes 2013 Annual Report Download - page 89

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C | Combined Management Report | Liquidity and Capital Resources
Services on the basis of a standardized risk management process.
In this process, minimum requirements are defined for the
sales financing and leasing business and standards are set
for credit processes as well as for the identification, mea-
surement and management of risks. Key elements for the man-
agement of credit risks are appropriate creditworthiness
assessments, supported by statistical analyses and evaluation
methods, as well as structured portfolio analysis and monitoring.
Financial country risk management includes various
aspects: the risk from investments in subsidiaries and joint
ventures, the risk from the cross-border financing of Group
companies in risk countries, and the risk from direct sales
to customers in those countries. The Credit Committee sets
country limits for this cross-border financing. Daimler has
an internal rating system that divides all countries in which
it operates into risk categories. Equity capital transactions
in risk countries are hedged against political risks with the use
of investment-protection insurance such as the German
government’s investment guarantees. Some cross-border receiv-
ables due from customers are protected with the use of
export-credit insurance, first-class bank guarantees and letters
of credit. In addition, a committee sets and restricts the
level of hard-currency credits granted to financial services
companies in risk countries.
Additional information on the management of market-price
risks, credit default and liquidity risks is provided in
E Note 32 of the Notes to the Consolidated Financial
Statements.
Cash flows
Cash provided by operating activities  C.24 increased
compared with the previous year by €4.4 billion to €3.3 billion.
The growth in net profit before income taxes includes non-
cash effects of €3.4 billion from the remeasurement of the EADS
shares. The development of working capital had positive effects.
This was due to an increase in trade payables and a smaller
increase in inventories; there were opposing effects from the
increase in trade receivables. Growth in new business in the
area of leasing and sales financing was slightly above the high
level of the previous year. The generally positive development
of other operating assets and liabilities was mainly connected
with the expansion of business and partially related to
invoicing. Value-added tax included and not yet paid to the
tax authorities as well as higher sales with residual-value
guarantees and with service and maintenance agreements
(due to the generally higher unit sales) already led to payments
received. For dealer bonuses, expenses were taken into
consideration that were not yet connected with payments.
Furthermore, contributions to pension funds were lower
than in 2012. In the previous year, special contributions of
€0.5 billion were made in connection with pension plans
to the plan assets of additional German entities. A positive effect
resulted from lower payments for income taxes; the year
2013 was influenced by reimbursements of advance payments
in Germany.
Cash used in investing activities  C.24 amounted to
€6.8 billion (2012: €8.9 billion). The decrease compared with
the prior year was primarily the result of purchases and
sales of securities carried out in the context of liquidity manage-
ment, which overall led to significantly lower cash outflows
(net). The sale of the remaining EADS shares resulted in higher
proceeds in 2013 than in 2012. Compared with the invest-
ments in companies made in 2012, the acquisition of the 12%
stake in BAIC Motor Corporation Ltd. (BAIC Motor) for €0.6
billion and the capital increase at Beijing Benz Automotive Co.,
Ltd. (BBAC) led to higher cash outflows in 2013. Furthermore,
slightly higher investment in property, plant and equipment and
in intangible assets resulted in higher cash outflows.
C.24
Condensed consolidated statement of cash flows
2013 2012 13/12
In millions of euros Change
Cash and cash equivalents
at beginning of year
10,996
9,576 +1,420
Net cash provided by operating
activities 3,285
-1,100 +4,385
Net cash used for
investing activities -6,829
-8,864 +2,035
Net cash provided by financing
activities 3,855
11,506 -7,651
Effect of exchange-rate changes
on cash and cash equivalents
-254
-122 -132
Cash and cash equivalents
at end of year
11,053
10,996 +57