Financial Targets

  Target 2020 2019
Leverage factor: Economic debt/Operating EBITDA1) ≤ 2.5 1.9 2.6
Coverage ratio: Operating EBITDA/financial result1) > 4.0 8.3 8.5
Equity ratio: Equity to total assets (in percent) ≥ 25.0 36.1 38.2

1) After modifications.

     

Bertelsmann utilizes a financial management system employing quantitative financial targets concerning the Group’s economic debt and, to a lesser extent, its capital structure. One of the financial targets is a dynamic leverage factor limited to the defined maximum of 2.5. As of December 31, 2020, the leverage factor of Bertelsmann was 1.9, significantly lower than the previous year’s level (December 31, 2019: 2.6).

Primarily due to a high operating cash flow, net financial debt decreased. As of December 31, 2020, economic debt decreased to €5,207 million from €6,511 million in the previous year, due to a significant decrease in net financial debt to €2,055 million (December 31, 2019: €3,364 million). As of December 31, 2020, recognized lease liabilities were €1,355 million (December 31, 2019: €1,392 million). Provisions for pensions and similar obligations rose to €2,009 million as of December 31, 2020 (December 31, 2019: €1,967 million).

Another financial target is the (interest) coverage ratio. This is calculated as the ratio of operating EBITDA, used to determine the leverage factor, to financial result, and should exceed four. In the reporting period, the coverage ratio was 8.3 (previous year: 8.5). The Group’s equity ratio was 36.1 percent (December 31, 2019: 38.2 percent), which remains significantly above the self-imposed minimum of 25 percent.