BMW 2010 Annual Report Download - page 50

48
12 GROUP MANAGEMENT REPORT
12 A Review of the Financial Year
14 General Economic Environment
18 Review of Operations
41 BMW Group – Capital Market
Activities
44 Disclosures relevant for takeovers
and explanatory comments
47 Financial Analysis
47 Internal Management System
49 Earnings Performance
51 Financial Position
53 Net Assets Position
55 Subsequent Events Report
55 Value Added Statement
57 Key Performance Figures
58 Comments on BMW AG
62 Internal Control System and
explanatory comments
63 Risk Management
70 Outlook
Group ROCE is measured by dividing earnings for ROCE
purposes by the average amount of capital employed.
For
these purposes, capital employed comprises group
equity, pension provisions and the financial liabilities of
the Automobiles and Motorcycles segments.
The average level of capital employed for a particular
year is measured as the average capital employed at the
ROE is defined as the profit before taxes divided by the
average amount of equity capital allocated to the Financial
Value management in the context of project management
The Automobiles and Motorcycles segments are managed
on the basis of specific product projects on the one hand
and process and infrastructure projects on the other, all of
which are subject to the framework set by the Group’s
Services segment. The target is a sustainable return on
equity of at least 18%.
forecasts by period. The project decision and related
project selection are important aspects of our value-based
management approach. Project decisions are taken on
the basis of rates of return and net present values (NPVs),
supplemented by a standardised approach to assessing
beginning of the year, at quarter-ends and at the end of
the year. In line with the computation of employed capital,
earnings for ROCE purposes are defined as profit before
interest expense incurred in conjunction with the pension
provision and the financial liabilities of the Automobiles
and Motorcycles segments (profit before interest expense
and taxes).
The ROCE of the Automobiles and Motorcycles seg-
ments is measured on the basis of the profit before finan-
cial
result and the average level of capital employed.
The latter comprises all current and non-current opera-
tional assets less liabilities that do not incur interest e.g.
trade payables. Based on the cost of capital as a mini-
mum rate of return and comparisons with competitive
market returns, the target ROCE for the Automobiles
and Motorcycles segments has been set at a minimum
of 26%.
Capital employed by Automobiles segment
in euro million
2010 2009
Operational assets 27,787 27,659
less: Non-interest-bearing liabilities 16,948 14,516
Capital employed 10,839 13,143
Return on equity
Profit Equity Return
before tax on equity
in euro million in euro million in %
2010 2009 2010 2009 2010 2009
Financial Services 1,214 365 4,654 3,978 26.1 9.2
Return on capital employed
Earnings for Capital Return on
ROCE purposes employed capital employed
in euro million in euro million in %
2010 2009 2010 2009 2010 2009
BMW Group 5,203 922 26,555 27,923 19.6 3.3
Automobiles 4,355 – 265 10,839 13,143 40.2 –
Motorcycles 71 19 394 405 18.0 4.7