Defintions of financial ratios and financial terms

Term  Description  Reason for use 
Proportion of risk-bearing capital  Equity and deferred tax liabilities expressed as a percentage of the balance sheet total. Relevant from a credit perspective, shows the ability to sustain losses.
Return on equity Profit/loss for the year expressed as a percentage of average equity during the period. In reporting interim periods, the results are extrapolated to cover a twelve-month period. Relevant from a shareholder perspective, as it reflects the return on the shareholders’ capital for the period.
Return on capital employed Earnings before tax and financial expense as a percentage of average capital employed for the period. See the definition of capital employed below. Relevant for investors and lenders, as it show the return on capital that requires a return. Used for optimising capital allocation.
Balance sheet total The value of all assets, such as property, plant and equipment, inventories, trade receivables, and cash and cash equivalents. Relevant for giving stakeholders a simple means of monitoring changes in consolidated total assets.
Equity per share Equity excluding non-controlling interests divided by the number of shares. A relevant measure for investors which shows the size of the debt to the owners that is related to each share.
Investments Non-current assets acquired during the period. Relevant for showing the overall size of the investments that are made to maintain the existing capacity and generate growth.
Capital turnover rate Revenue divided by average capital employed. Relevant for assessing how quickly capital is used on average. A type of measure of capital efficiency.
Cash flow from operating activities Cash flow from operating activities excluding financing and investments. Relevant for enabling investors to monitor the capacity of the company’s operating activities to generate cash flow for financing new investments, repayments of debt and dividends, and for assessing the need for new financing.
Cash flow per share Cash flow from operating activities divided by average number of shares. Relevant for relating cash-generating capacity to the number of shares.
Liquidity reserves Cash and bank balances and non-utilised credit commitments from banks at end of period. Relevant for assessing the company’s ability to finance its future operations and variations in monetary flows through the company.
Net debt/EBITDA Net interest-bearing debt divided by earnings before depreciation, amortisation and impairment. In reporting interim period, the earnings for 12 months ongoing are used. Relevant for assessing the company’s ability to repay loans, which is of interest to lenders and investors.
Net interest-bearing debt Interest-bearing liabilities and interest-bearing provisions (provisions for pensions) less cash and cash equivalents and interest-bearing receivables. Relevant for assessing the total interest-bearing debt used by the company.
Net debt/equity ratio Net interest-bearing debt divided by equity. Relevant for assessing the capital structure, the breakdown between equity and debt capital.
Profit/loss before depreciation and write-downs (EBITDA) Operating profit/loss before depreciation according to plan and impairment losses. Relevant as a measure of the company’s operational capacity to generate cash flow before capital tied up in operating activities and financial flows.
Earnings per share Profit or loss for the period excluding earnings attributable to non-controlling interests divided by average number of shares. Relevant for enabling investors to assess the return on and valuation of the shares.
Profit margin Profit/loss before tax expressed as a percentage of revenue. Relevant for assessing how large a share of revenue is retained as profits. Can also be used for comparisons between companies. The measure also shows the company’s ability to sustain negative deviations.
Interest coverage ratio Profit/loss before tax and financial expense divided by financial expense. Relevant for lenders as a measure of the company’s ability to meet interest expenses.
Operating margin Operating profit/loss as a percentage of revenue. Relevant for assessing how large a share of revenue is retained as profits from the company’s operating activities. Can also be used for comparisons between companies.
Operating profit/loss Profit/loss before tax and financial items. Relevant as a measure of the earnings generated by the company’s operating activities.
Equity ratio Equity expressed as a percentage of total assets. Relevant as a measure of current self-financing, as it shows how large a portion of the assets are equity-funded.
Net worth per share See equity per share.
Capital employed Equity and interest-bearing liabilities. Relevant for showing the share of total capital that is used in the operating activities, one component for measuring the operational return.

The key performance indicators are based on figures for the Group, including non-controlling interests, except for earnings per share and net worth per share.