Mercedes 2015 Annual Report Download - page 71

78 B | COMBINED MANAGEMENT REPORT | CORPORATE PROFILE
Cost of capital
The required rate of return on net assets, and hence the cost
of capital, is derived from the minimum rates of return that
investors expect on their invested capital. The calculation of the
cost of capital for the Group and the industrial divisions takes
into consideration the cost of equity as well as the costs of debt
and the net pension obligations of the industrial business.
The expected returns on liquidity of the industrial business are
considered with the opposite sign. The cost of equity is calcu-
lated according to the capital asset pricing model (CAPM), using
the interest rate for long-term risk-free securities (such as
German government bonds) plus a risk premium reflecting the
specific risks of an investment in Daimler shares. While the cost
of debt is derived from the required rate of return for obliga-
tions entered into by the Group with external lenders, the cost
of capital for net pension obligations is calculated on the basis
of discount rates used in accordance with IFRS. The expected
return on liquidity is based on money market interest rates.
The Group’s cost of capital is the weighted average of the indi-
vidually required or expected rates of return. During the reporting
period, the cost of capital amounted to 8% after taxes. For the
industrial divisions, the cost of capital amounted to 12% before
taxes; for Daimler Financial Services, a cost of equity of 13%
before taxes was applied.
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Return on sales
As one of the main factors influencing value added, return
on sales is of particular importance for assessing the industrial
divisions’ profitability. The combination of return on sales and
net assets’ productivity results in return on net assets (RONA).
If RONA exceeds the cost of capital, value is created for our
shareholders. The measure of profitability for Daimler Financial
Services is not return on sales, but return on equity.
Key performance indicators
The important financial indicators for measuring our operating
financial performance, in addition to EBIT and revenue, are the
free cash flow of the industrial business, investment, and research
and development expenditure. Along with the indicators of
financial performance, we also use various non-financial indica-
tors to help us manage the Group. Of particular importance
in this respect are the unit sales of our automotive divisions,
which we use as the basis for our capacity and human
resources planning, and workforce numbers.
Furthermore, within the context of our sustainability manage-
ment, we use other non-financial indicators such as the
CO2 emissions of our vehicle fleet and the energy and water
consumption of our production sites. Non-financial indicators
are also used to determine the remuneration of our Board
of Management members. In addition, integrity and compliance
are important criteria used in annual goal agreements for
our managers, as well as in target-achievement assessments.
Details of the development of non-financial performance indi-
cators can be found in the chapters “Economic Conditions
and Business Development” and “Sustainability.” E p a g e s 7 9 ff
and pages 105 ff. For “Integrity and Com pliance,” see pages
E 185 ff.
Corporate governance statement
The corporate governance statement to be issued pursuant
to Section 289a of the German Commercial Code (HGB)
can be seen on the Internet at w daimler.com/corpgov/en.
Pursuant to Section 317 Subsection 2 Sentence 3 of the
German Commercial Code (HGB), the contents of the statement
pursuant to Section 289a of the HGB are not included in
the audit carried out by the external auditors.
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Cost of capital
2015 2014
In percent
Group, after taxes 88
Industrial business, before taxes 12 12
Daimler Financial Services, before taxes 13 13