Reebok 2006 Annual Report Download - page 200

196 ANNUAL REPORT 2006 › adidas Group ›
Forward Contract
Agreement to exchange amounts of one currency for another currency at an agreed fixed rate
at a future date.
Free Cash Flow
Cash that is generated by a company’s operating activities after the deduction of capital expen-
diture and other cash expenses such as taxes and interest from the operating profit.
Free cash flow = operating profit + depreciation and amortization (incl. goodwill) +/– changes in
operating working capital – capital expenditures +/- non-operating components.
German Co-Determination Act
In German Mitbestimmungsgesetz (MitbestG). This act governs the form of co-determination
of employees in corporations employing more than 2,000 employees. It stipulates, among oth-
er things, that such a corporation’s Supervisory Board must be composed of an equal number
of employees and shareholder representatives.
Goodwill
An intangible asset that quantifies the price that a buyer of a company has paid or the reputa-
tion, know-how and market position of the acquired company. Goodwill is the excess of the
amount paid over the fair value of the net assets acquired at the purchase date.
Gross Domestic Product (GDP)
The market value of all finished goods and services produced within a country in a given period
of time.
GDP = consumption + investment + government spending + (exports − imports).
Gross Margin
Gross profit as a percentage of net sales.
Gross margin = (gross profit / net sales) x 100.
Gross Profit
Difference between net sales and the cost of sales.
Gross profit = net sales - cost of sales.
Hardware / Hard Goods
This category of sporting goods comprises sports equipment that is used rather than worn by
the athlete, such as balls and golf clubs.
Hedging
A strategy used to minimize exposure to changes in prices, interest rates or exchange rates by
means of derivative financial instruments (options, swaps, forward contracts, etc.). See also
Natural Hedges.
Initial Public Offering (IPO)
The first placement of a corporation’s common shares on an organized market.
Institutional Investor
Investors such as investment companies, mutual funds, brokerages, insurance companies,
pension funds, investment banks and endowment funds. They are financially sophisticated
with a greater knowledge of investment vehicles and risks, and have the means to make large
investments.
Interest Coverage
Indicates the ability of a company to cover net interest expenses with income before net inter-
est and taxes.
Interest coverage = income before interest and tax / interest.
Interest Rate Caps
Option contracts which place an upper limit on a floating interest rate. The writer of the cap is
required to pay the holder of the cap the difference between the floating rate and the reference
rate when that reference rate is exceeded. There is a premium to be paid by the buyer of such
a contract as the market price for the potential pay-out.
International Accounting Standards Board (IASB)
An independent, privately-funded cooperation of professional associations dealing with mat-
ters of financial accounting and setting and promoting the IFRS (formerly IAS).
International Financial Reporting Interpretations Committee (IFRIC)
Accounting body which rules on controversial accounting issues. Its interpretations are
approved by the International Accounting Standards Board (IASB) and, once adopted, are
binding on all International Financial Reporting Standards (IFRS) users.
International Financial Reporting Standards (IFRS)
Reporting standards (formerly called IAS) which have been adopted by the International
Accounting Standards Board (IASB). The objective is to achieve uniformity and transparency
in the accounting principles that are used by businesses and other organizations for financial
reporting around the world.
Inverted Cone Technology (ICT)
Expands the portion of the clubface that delivers high ball speed. The Inverted Cone, which is
milled directly into the inner side of the clubface to exacting dimensions, radically changes the
way the clubface behaves at impact.
Investments
See Capital Expenditure.
Key Accounts
Wholesalers or retailers which are primary customers and account for a large percentage of
sales.
Glossary ›