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Annual Report 2018
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Glossary

Asset-backed financing transactions

A form of corporate financing involving the sale of receivables to a financing company.

Bond

A securitised debt instrument in which the issuer certifies its obligation to repay the nominal amount at the end of a fixed term and to pay a fixed or variable rate of interest.

Business volume in balance sheet terms

The sum of the balance sheet line items “Leased products” and “Receivables from sales financing” (current and non-current), as reported in the balance sheet for the Financial Services segment.

Capital expenditure ratio

Investments in property, plant and equipment and other intangible assets (excluding capitalised development costs) as a percentage of Group revenues.

Capitalisation rate

Capitalised development costs as a percentage of research and development expenditure.

Cash flow

Liquid funds generated (cash inflows) or used (cash outflows) during a reporting period.

Cash flow at risk

Similar to “value at risk” (see definition below).

Cash flow hedge

A hedge against exposures to the variability in forecasted cash flows, particularly in connection with exchange rate fluctuations.

Commercial paper

Short-term debt instruments with a term of less than one year which are usually sold at a discount to their face value.

Consolidation

The process of combining separate financial statements of Group entities into Group Financial Statements, depicting the financial position, net assets and results of operations of the Group as a single economic entity.

Credit default swap (CDS)

Financial swap agreements, under which creditors of securities (usually bonds) pay premiums to the seller of the CDS to hedge against the risk that the issuer of the bond will default. As with credit default insurance agreements, the party receiving the premiums gives a commitment to compensate the bond creditor in the event of default.

Earnings per share (EPS)

Basic earnings per share are calculated for common and preferred stock by dividing the net profit after minority interests, as attributable to each category of stock, by the average number of shares in circulation. Earnings per share of preferred stock are computed on the basis of the number of preferred stock shares entitled to receive a dividend in each of the relevant financial years.

EBIT

Abbreviation for “Earnings Before Interest and Taxes”, equivalent in the BMW Group income statement to “Profit / loss before financial result”.

EBIT margin

Profit / loss before financial result as a percentage of revenues.

Effective tax rate

The effective tax rate is calculated by dividing the income tax expense by the Group profit before tax.

Equity ratio

Equity capital as a percentage of the balance sheet total.

Fair value

The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Fair value hedge

A hedge against exposures to fluctuations in the fair value of a balance sheet item.

Goodwill

Goodwill corresponds to the consideration paid to acquire an entity, less the fair value of the separate assets acquired and liabilities assumed. The buyer is willing to pay the additional amount in return for future expected earnings.

Gross margin

Gross profit as a percentage of Group revenues.

Post-tax return on sales

Group net profit as a percentage of Group revenues.

Pre-tax return on sales

Group profit / loss before tax as a percentage of Group revenues.

Research and development expenditure

The sum of research and non-capitalised development cost and capitalised development cost (not including the associated scheduled amortisation).

Research and development expense ratio

Research and non-capitalised development costs as a percentage of Group revenues.

Return on Capital Employed (RoCE)

RoCE in the Automotive and Motorcycles segments is measured on the basis of relevant segment profit before financial result and the average amount of capital employed in the segment concerned. Capital employed corresponds to the sum of all current and non-current operational assets, less liabilities that do not incur interest.

Return on Equity (RoE)

RoE in the Financial Services segment is calculated as segment profit before taxes, divided by the average amount of equity capital attributable to the Financial Services segment.

Value at risk

A measure of the potential maximum loss in value of an item during a set time period, based on a specified probability.