Performance measurement system
The performance measurement system used at Daimler is designed to ensure that our investors’ interests and expectations are taken into account within the framework of a value-based management system. Value added shows the extent to which the Group and its divisions achieve or exceed the return requirements of the investors, thus creating additional value.
Value added is derived from financial value drivers which, due to their direct relationship to ongoing business operations, are utilized as financial performance indicators for the periodic assessment of the performance of the Group and its divisions.
In this sense, value added can be calculated as the difference between the measure of operating profit (EBIT or net operating profit) and the cost of capital of the average net assets. (See graphic B.02)
The return on net assets (RONA) is calculated from the ratio of EBIT to net assets. Value is created for our shareholders when RONA exceeds the cost of capital. The required rate of return on net assets, and hence the cost of capital rate, is derived from the minimum rates of return that equity investors and lenders expect on their invested capital. During the year under review, the cost of capital rate of the Group remained unchanged at 8 % after taxes. For the automotive divisions, the cost of capital rate remained at 12 % before taxes; for Daimler Mobility, a cost of equity of 12 % before taxes was applied (2019: 13 %). (See table B.03)
The quantitative development of value added and the related financial performance measures is explained in the chapter »Profitability«.