Mercedes 2012 Annual Report Download - page 100

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3 | Management Report | Liquidity and Capital Resources
The risk volume that is subject to credit risk management
includes all of Daimler’s worldwide creditor positions with finan-
cial institutions, issuers of securities and customers in the
financial services business and automotive businesses. Credit
risks with financial institutions and issuers of securities
arise primarily from investments executed as part of our liquidity
management and from trading in derivative financial instru-
ments. The management of these credit risks is mainly based
on an internal limit system that reflects the creditworthiness
of the respective financial institution or issuer. The credit risk
with customers of our automotive businesses relates to
contracted dealerships and general agencies, other corporate
customers and retail customers. In connection with the export
business, general agencies that according to our credit-
worthiness analysis are not sufficiently creditworthy are gener-
ally required to provide collateral such as first-class bank
guarantees. The credit risk with end customers in the financial
services business is managed by Daimler Financial 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, measurement
and management of risks. Key elements for the management
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. A 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 receivables 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 31 of the Notes to the Consolidated Financial
Statements.
Cash flows
Cash provided by operating activities  3.29 of minus
€1.1 billion was lower than in the prior year. There were
negative effects from the lower net profit before income taxes
and the higher volume of new business in the area of leasing
and sales financing. The increase in working capital was slightly
higher than in the prior year. The comparatively low increase
of inventories and the decrease of trade receivables did not fully
offset the development of trade payables. Positive effects
resulted from lower income-tax payments (€2.1 billion; 2011:
€2.8 billion); the prior year was significantly affected by
payments of income taxes for previous years in North America.
The year-on-year comparison is also affected by significantly
lower contributions to pension funds (€1.1 billion; 2011:
€2.0 billion).
3.29
Condensed consolidated statement of cash flows
2012 2011 12/11
In millions of euros Change
Cash and cash equivalents
at beginning of year
9,576
10,903 -1,327
Net cash from operating
activities
-1,100 -696 -404
Net cash used in investing
activities
-8,864 -6,537 -2,327
Net cash from financing
activities
11,506 5,842 5,664
Effect of exchange-rate changes
on cash and cash equivalents
-122
64 -186
Cash and cash equivalents
at end of year
10,996
9,576 1,420