The debt repayment period is a strategic indicator stating the number of periods needed to clear debt out of internally generated funds. It is the ratio of net debt to free cash flow (FCF) before financing.

Liquidity Coefficient: Quick Ratio

The liquidity coefficient or quick ratio is the ratio of current assets to current liabilities and serves as an indicator of the Company’s ability to meet its liabilities in the short term.

Cash Generation: Cash Flow Return on Revenue

To maintain liquidity, it is important to know what size of cash inflow is generated by a given unit of revenue. This information is provided by cash flow return on revenue, which states the percentage of generated revenue that remains in the Company as an inflow of cash (before financing).

The ratio of operating net income to shareholders’ equity represents return on equity, while the ratio of operating net income (plus interest) to total assets represents return on assets.

Return on Sales

Return on sales is the ratio of operating net income to revenue. Multiplying by asset turnover reveals the relationship with return on assets.

The equity ratio (shareholders’ equity to total assets) is often used by external parties as a measure of creditworthiness. The ratio also gives an indication of how far absolute profit is generated using the leverage effect.

Working Capital as Percentage of Revenue

Working capital as a percentage of revenue shows the amount of capital (in the form of current receivables, current liabilities and inventories) committed per unit value of revenue.

The profitability ratios are of special interest because they feature the central control parameter of operating net income as a target in the denominator. Figures based on earnings before interest and taxes (EBIT) and absolute revenue are used as the basis for target attainment by all parts of the Group and for determining variable compensation.

Rather than being viewed in isolation, the ratios are interpreted and analysed at all times on an integrated basis, taking into account any interdependencies. The liquidity, profitability and balance sheet-related targets are likewise treated as interdependent parameters.

IFRS Basis

The key performance indicators (KPIs) described above are determined from IFRS-basis financial reporting data. Adjustments are made where this information is not suited to internal control at Demag Cranes. This includes adjusting for extraordinary items (such as from restructuring).

All the key performance indicators are initially analysed at holding company level. Most of the figures they are based on originate at lower hierarchical levels. This makes it possible to drill down for financial analysis purposes, but also calls for systems-based computation of the indicators to ensure that they are derived to the same quality standards worldwide.

Order Intake and Order Book as Advance Indicators

To obtain advance indicators of performance, order intake and order book figures are tracked separately by subsidiary and product group. As well as looking at the absolute figures here, it is also highly important to measure the target gross margin in order intake and order book. These provide an indication of gross profit (revenue less cost of sales) attainable in the future. The gross margin in the order book is the margin that, based on preliminary costing, is expected to be achieved when orders in the order book are turned into revenue. Similarly, the gross margin in order intake is the expected margin on orders generated during a specific period. These also make for maximum accuracy in gross profit and EBIT projections.

Functional Indicators

The vertical and horizontal integration of Demag Cranes has significantly heightened the importance of managing companies from a functional perspective and of making use of indicators designed for this purpose. The extension of Group financial control to take in the functional dimension relates not merely to standard monthly reporting, but also to the strategic control level. Clear uniform indicators specified for each function are reported on a monthly basis and centrally analysed. Examples of such indicators for the production function include productive hours as a proportion of attendance hours, the proportion of temporary manpower, and the number of overtime hours, all determined separately by operating location.