Electrolux 2003 Annual Report Download - page 79

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Electrolux Annual Report 2003 77
Definitions
Capital indicators
Annualized sales
In computation of key ratios where capital
is related to net sales, the latter are annu-
alized and converted at year-end exchange
rates and adjusted for acquired and
divested operations.
Net assets
Total assets, excluding liquid funds,
interest-bearing financial receivables,
as well as non-interesting-bearing
liabilities and provisions.
Adjusted equity
Equity, including minority interests.
Working capital
Net assets less fixed assets and deferred
tax assets/liabilities.
Net borrowings
Total interest-bearing liabilities less liquid
funds.
Net debt/equity ratio
Net borrowings in relation to adjusted
equity.
Equity/assets ratio
Adjusted equity as a percentage of total
assets less liquid funds.
Net income per share
Net income per share
Net income divided by the average
number of shares after buy-backs.
Net income per share according to
US GAAP
See information on US GAAP in
Note 30, on page 67.
Other key ratios
Organic growth
Sales growth, adjusted for acquisitions,
divestments and changes in exchange
rates.
EBITDA margin
Earnings before interest, tax, depreciation
and amortization expressed as a percent-
age of net sales.
Operating cash flow
Total cash flow from operations and
investments, excluding acquisitions
and divestment of operations.
Operating margin
Operating income expressed as a
percentage of net sales.
Return on equity
Net income expressed as a percentage
of average equity.
Return on net assets
Operating income expressed as a
percentage of average net assets.
Interest coverage ratio
Operating income plus interest income
in relation to total interest expense.
Capital turnover rate
Net sales divided by average net assets.
Value creation
Value creation is the primary financial
performance indicator for measuring and
evaluating financial performance within the
Group. The model links operating income
and asset efficiency with the cost of the
capital employed in operations. The model
measures and evaluates profitability by
region, business area, product line, and
operation.
Value created is measured excluding
items affecting comparability and defined
as operating income less the weighted
average cost of capital (WACC) on aver-
age net assets during a specific period.
The cost of capital varies between differ-
ent countries and business units due to
country-specific factors such as interest
rates, risk premiums and tax rates.
A higher return on net assets than the
weighted average cost of capital implies
that the Group or the unit creates value.
Electrolux Value Creation model
Net sales
– Cost of goods sold
– Marketing and administration costs
= Operating income, EBIT1)
– WACC x Average net assets1)
= Value creation
EBIT= Earnings before interest and taxes,
excluding items affecting comparability.
WACC=Weighted Average Cost of Capital,
13% in 2003 and 2002, before tax. The WACC
for previous years has been 14% before tax.
1) Excluding items affecting comparability.