Liabilities, Financial Management

Liabilities

The company must take into account the nature of its liabilities as well as its solvency position.

Cash Flows: Besides the investment yields, money flows as paid contributions and flows out as pension expenditure in the company. The pension expenditure is calculated depending on the number of pensioners and the average funded pensions. The contributions depend on the total salaries of the insured persons.

Solvency Capital: Solvency capital is the amount by which the total assets of the company exceed the sum of its reserves. It functions as a buffer against the variation of the investment results. Because the reserves of a pension insurance company must always be fully covered by its assets, a non-positive solvency capital means a bankruptcy. Therefore, the development of the solvency capital is an important factor in policy evaluations. The legislation prescribes various minimum and target levels for the solvency capital of a pension insurance company. The basic quantity is the solvency border, which depends on the structure of the company's investment portfolio. The lower border of the target zone is twice the amount of the solvency border. The position of the solvency capital relative to these levels is an indicator of the solvency risk of the company.

 

Posted Date: 9/11/2012 1:35:28 AM | Location : United States







Related Discussions:- Liabilities, Assignment Help, Ask Question on Liabilities, Get Answer, Expert's Help, Liabilities Discussions

Write discussion on Liabilities
Your posts are moderated
Related Questions
What is a sunk cost?  Is it relevant while evaluating a proposed capital budgeting project?  Explain. A sunk cost is a cash flow which has previously occurred, or that will take

The risk free rate is 10 percent and the expected return on the market portfolio is 14 percent. A firm considers a project that is expected to have a beta of 1.3, whereas the beta

What is compound interest? Compare compound interest to discounting. Compound interest takes place while interest is earned on interest and on the original principal of an invest

Activity Ratio's   RT:           The Receivables Turnover ratio is the ratio between sales to accounts receivables. This says exactly how fast a company can collect on the s

Example of Company Objectives Divide from the problem of which goal a company ought to pursue are the questions of which goals companies claim to pursue and which goals they a


Recent surveys of corporate exchange risk management practices point out that many U.S. firms simply do not hedge. How would you explain this result? Answer:  There can be severa

Determine about the synergistic effect When two or more companies join together there must be a synergistic effect. Synergy is when 2 + 2 = 5. Net present value of the two comp

Event-Driven Strategies : These strategies are solely focus on events of corporate life cycle for investing. They involve significant opportunities created by corporate events such

Explain the operating cycle of a vegetable growing business