Financial Glossary

Earnings Before Interest and Taxes ‏(EBIT) adjusted for exceptional items in the form of one-time expenses and income, and for restructuring expenses.

Capital invested in company assets and operations.

Acting in conformity with applicable regulations; adherence to laws, rules, regulations and in-house or corporate codes of conduct. 

Year-over-year rate of growth, e.g. of an investment.

System of management and control, primarily within listed companies. Describes the powers and authority of corporate management, the extent to which these need to be monitored and the extent to which structures should be put in place through which certain interest/ stakeholder groups may exert influence on the corporate management. 

The German Corporate Governance Code ‏(abbreviation: DCGK) is intended to render the rules governing corporate management and control for a stock corporation in Germany transparent for national and international investors, engendering trust and confidence in the corporate management of German companies. 

Instrument used by Henkel to evaluate the credit risks of banks. 

Aggregate of all loan services available on call from one or several banks as cover for an immediate credit requirement. 

Declaration made by the management / executive board and supervisory board of a company according to Section 161 German Stock Corporation Act [AktG], confirming implementation of the recommendations of the Governmental Commission for the German Corporate Governance Code.

Post-employment benefit plans under which an entity pays fixed contributions into a separate fund and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in current and prior periods.

Financial instrument, the value of which changes in response to changes in an underlying asset or an index, which will be settled at a future date and which initially requires only a small or no investment. 

Metric indicating the income of a joint stock corporation divided between the weighted average number of its shares outstanding. The calculation is performed in accordance with International Accounting Standard ‏(IAS) 33. 

Abbreviation for Earnings Before Interest and Taxes. Standard profit metric that enables the earning power of the operating business activities of a company to be assessed independently of its financial structure, facilitating comparability between entities where these are financed by varying levels of debt capital.

Abbreviation for Earnings Before Interest, Taxes, Depreciation and Amortization; impairment losses and reversals/value write-ups are also eliminated from the earnings calculation.

The EVA concept reflects the net wealth generated by a company over a certain period. A company achieves positive EVA when the operating result exceeds the weighted average cost of capital. The WACC corresponds to the yield on capital employed expected by the capital market. EVA is a registered trademark of Stern Stewart & Co. 

Financial metric indicating the ratio of equity to total capital. It expresses the share of total assets financed out of equity ‏(owners’ capital) rather than debt capital ‏(provided by lenders). Serves to assess the financial stability and independence of a company. 

Cash flow actually available for acquisitions, dividend payments, the reduction of borrowings and contributions to pension funds.

Indicates the percentage by which a company’s sales exceed cost of sales, i.e. the ratio of gross profit to sales.

Difference between sales and cost of sales.

Method for accounting for hedging transactions whereby the compensatory effect of changes in the fair value of the hedging instrument ‏(derivative) and of the underlying asset or liability is recognized in either the statement of income or the statement of comprehensive income.

Abbreviation for “Kommanditgesellschaft auf Aktien.” A KGaA is a company with a legal identity ‏(legal entity) in which at least one partner has unlimited liability with respect to the company’s creditors ‏(personally liable partner), while the liability for such debts of the other partners participating in the share-based capital stock is limited to their share capital ‏(limited shareholders). 

Bonus aligned to long-term financial performance. 

The net financial position is defined as cash and cash equivalents, including cash and cash equivalents held for sale, plus readily monetizable securities and time deposits and financial collateral provided, less borrowings, plus positive and minus negative fair values of derivative financial instruments.

In the extended definition, provisions for pensions and similar obligations, lease liabilities and the sundry financial liabilities are added to the net financial position and the receivable from Henkel Trust e.V. is deducted.

Inventories plus payments on account, receivables from suppliers and trade accounts receivable, less trade accounts payable, liabilities to customers and current sales provisions.

Proportion of equity attributable to third parties ‏(non-controlling shareholders, aka minority shareholders) in subsidiaries included within the scope of consolidation. Valued on a proportional net asset basis. A pro-rata portion of the net income of a corporation is due to shareholders owning non-controlling interests.

Growth in sales after adjusting for effects arising from acquisitions, divestments and foreign exchange effects – i.e. “top line” growth generated from within. Also excluded from the calculation is the organic sales development in Russia since the beginning of the second quarter of 2022 against the background of the announced exit of the business activities there, and the effects arising from the application of IAS 29 ‏(Financial Reporting in Hyperinflationary Economies) for Türkiye.

Indicates what percentage of annual net income ‏(adjusted for exceptional items) is paid out in dividends to shareholders, including non-controlling interests.

Contains investments in equities and alternative investments, and serves to improve the overall return of the pension plan assets over the long term in order to raise the coverage ratio of pension funds. In addition, a broader investment horizon increases the level of investment diversification.

Profitability metric reflecting the ratio of earnings before interest and taxes ‏(EBIT) to capital employed.

Operating business metric derived from the ratio of EBIT to revenues. Also known as EBIT margin.

Term given to the exchange of capital amounts in differing currencies ‏(currency swap) or of different interest obligations ‏(interest swap) between two entities.

Method, based on fair value, used to calculate the maximum likely or potential future loss arising from a portfolio.

Average return on capital, expressed as a percentage and calculated on the basis of a weighted average of the cost of debt and equity. WACC represents the minimum return expected of a company by its lenders for financing its assets.