|Leverage factor: Economic debt/Operating EBITDA1)||≤ 2.5||2.6||2.7|
|Coverage ratio: Operating EBITDA/financial result1)||> 4.0||8.5||11.1|
|Equity ratio: Equity to total assets (in percent)||≥ 25.0||38.2||38.8|
1) After modifications.
Bertelsmann utilizes a financial control 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, 2019, the leverage factor of Bertelsmann was 2.6, lower than the previous year’s level (December 31, 2018: 2.7). Due to a high operating release of funds, net financial debt decreased. This was counteracted by the increase in pension provisions due to the lower discount rate and the increase in the present value of lease liabilities resulting from IFRS 16. Both of these effects caused the leverage factor limit to be exceeded. Assuming that the discount interest rate did not change from the previous year, the leverage factor would have been below 2.4 as of December 31, 2019.
As of December 31, 2019, economic debt decreased to €6,511 million from €6,619 million in the previous year, due to a decrease in net financial debt to €3,364 million (December 31, 2018: €3,932 million). In contrast, the recognized lease liabilities increased (method effect of IFRS 16) to €1,392 million (December 31, 2018/net present value of operating leases: €1,161 million). Provisions for pensions and similar obligations rose to €1,967 million as of December 31, 2019 (December 31, 2018: €1,738 million), primarily due to a decrease in the discount interest rate.
Another financial target is the 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 8.5 (previous year: 11.1). The Group’s equity ratio was 38.2 percent (December 31, 2018: 38.8 percent), which remains significantly above the selfimposed minimum of 25 percent.