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168 Financial Analysis
Financial Glossary
ABS (Asset-Backed Securities)
Securities (bonds or notes) backed by loan receivables, accounts receivable or other quantifi -
able assets.
ADR (American Depositary Receipt)
A negotiable certifi cate of a foreign-based company held by a US bank that entitles the holder
to all dividends and rights of the underlying stock. ADRs are traded similarly to stocks on US
exchanges and provide a way for Americans to invest in foreign-based companies by buying
their shares in the USA instead of through an overseas exchange.
Asset Coverage I & II
The extent to which a company’s non-current assets cover its debt obligations. Expressed as a
percentage. They are calculated as follows:
Asset coverage I (%) = the sum of equity and non-current liabilities divided by non-current
assets.
Asset coverage II (%) = the sum of equity and non-current liabilities divided by non-current
assets and inventories.
Backlogs (also called Order Backlogs)
The value of orders received for future delivery. At brand adidas, orders are received approxi-
mately six months in advance, depending on the season. This information is used by the market
as an indicator of future sales performance.
Commercial Paper
Tradable unsecured promissory notes issued for the purpose of short-term fi nancing. Com-
mercial paper is issued on an ongoing, revolving basis with maturities typically between seven
days and 12 months or more.
Convertible Bond
A corporate bond that can be exchanged for a specifi c number of shares of the company’s com-
mon stock. Convertible bonds tend to have lower interest rates than non-convertibles because
they also accrue value as the price of the underlying stock rises. In this way, convertible bonds
refl ect a combination of the benefi ts of stocks and those of bonds.
Corporate Governance
The distribution of rights and responsibilities among different participants in a company, in
particular shareholders, the Executive Board, the Supervisory Board.
Corridor Approach
A range of plus or minus 10% around a company’s best estimate of post-employment benefi t
obligations (IAS 19). Outside that range, it is not reasonable to assume that actuarial gains or
losses will be offset in future years.
Cost of Sales
The costs of obtaining and manufacturing products. This fi gure includes costs for raw materi-
als plus the costs of production, customs and delivery to our sales organizations.
Currency-Neutral
Financial fi gures translated at prior-year exchange rates. This indicates increases or decreases
to reported fi gures by eliminating variances arising from currency translation and is the best
indicator of underlying business performance.
Current Asset Intensity of Investments
The current asset intensity of investments defi nes the percentage of total assets tied up in
current assets. It is calculated by dividing current assets by total assets.
Diluted Earnings Per Share (EPS)
Diluted EPS is a performance indicator that expresses a company’s net income used to
determine diluted earnings per share in relation to the weighted average number of shares for
diluted earnings per share.
Diluted EPS = (net income + interest expense on convertible bond net of tax)/(weighted aver-
age number of shares outstanding during the year + weighted share options + shares from
assumed conversion of convertible bond).
Earnings Per Share (EPS)
Earnings per share is a performance indicator that expresses a company’s net income in rela-
tion to the number of ordinary shares issued.
Earnings per share = net income/weighted average number of shares outstanding during the
year.
Equity Ratio
The equity ratio shows the role of shareholders’ equity within the fi nancing structure of a com-
pany. It is calculated by dividing shareholders’ equity by total assets.
Equity-To-Fixed-Asset Ratio
The equity-to-fi xed-asset ratio defi nes the percentage of non-current assets fi nanced by equity.
It is calculated by dividing equity by non-current assets.
Fair Value
Amount at which assets are traded fairly between business partners. Fair value is often identi-
cal to market price.