Selected Financial Terms – explained simply
Financial Glossary
Financial Glossary
A
The activation rate is defined as the ratio of activated development costs to total research and development costs in the Automotive division. It represents the proportion of total primary expenditures for research and development.
C
CapEx, short for Capital Expenditures, refers to the money a company spends to acquire, upgrade, or maintain long-term assets such as property, equipment, or infrastructure.
These expenditures are capitalized, meaning they are not expensed immediately but are depreciated over the useful life of the asset.
The cash conversion rate represents the ratio of net cash flow to operating profit in the Automotive division. This ratio shows the relationship between cash inflow/outflow and operating profit.
The term cash flow refers to the movement of money into and out of a business over a specific period. It reflects how much actual cash a company generates and uses, which is crucial for assessing its liquidity, financial health, and operational efficiency.
The China Electronic Platform is an E/E architecture jointly developed by Volkswagen China Technology Company (VCTC), CARIAD, and the vehicle manufacturer and cooperation partner XPENG for the Chinese market.
Designation for a platform developed by Volkswagen China Technology Company (VCTC), used by the joint ventures SAIC Volkswagen and FAW-VW as a basis for A-segment vehicles for the Chinese market.
CO₂ neutrality is achieved when anthropogenic CO₂ emissions worldwide are offset by avoidance, reduction, and compensation over a specific period. This includes all other relevant greenhouse gases. Avoidance and reduction are priorities for the Volkswagen Group.
D
Deliveries at VW are the actual handovers of vehicles to end customers worldwide.
This is the market‑relevant metric that shows how many vehicles ultimately reach the customer.
The dividend yield is calculated as the ratio of the dividend for the reporting year to the closing price of the last trading day of the reporting year per share class and shows the yield per share. The dividend yield is particularly used for stock valuation and comparison.
E
Scalable platform for secure and fast data processing in digitally networked vehicles. It improves communication between the vehicle and the cloud and enables higher vehicle performance.
The equity ratio indicates the percentage of equity to total capital at a specific date. This ratio is an indicator of the company's stability and capital strength and shows the degree of financial independence.
EREV stands for "Extended Range Electric Vehicle" and refers to electric vehicles with a range extender, i.e., an internal combustion engine that serves as a generator to charge the battery while driving. Unlike pure electric vehicles (BEV) and plug-in hybrids (PHEV), an EREV is mainly driven by the electric motor, with the combustion engine only extending the range.
F
Cash from or used in financing activities (e.g., issuing shares, borrowing, repaying debt)
G
The gross margin is the percentage of gross profit to sales revenue within a period. The gross margin provides information about profitability after sales costs.
H
Hybrid bonds are financial instruments that have characteristics of both bonds (debt securities) and stocks (equity). They are usually subordinated to other debts.
Drive that combines two different types of engines and energy storage systems (usually an internal combustion engine and an electric motor).
I
Cash used for or generated from investments (e.g., buying or selling assets like equipment or property).
The investment ratio in the Automotive division is calculated by adding the research and development cost ratio (R&D ratio) to the capital investment ratio. The R&D ratio in the Automotive division sets total research and development costs in relation to sales revenue. The capital investment ratio in the Automotive division expresses our innovation strength and future competitiveness. It is calculated by relating investments – mainly for the modernization and expansion of the product range, environmentally friendly engines, and the adjustment of production capacities and improvement of manufacturing processes – to sales revenue in the Automotive division.
N
The net cash flow of the Automotive division shows the surplus of funds from ongoing business, which is available for dividend payments, for example. It is calculated from the cash flow of ongoing business minus the investment activities of ongoing business.
Net liquidity in the Automotive division represents the amount of cash, cash equivalents, securities, loan receivables, and term deposits not financed by credit. To secure business activities, we have formulated the strategic goal that net liquidity in the Automotive division should be around 10% of the Group's sales revenue.
O
Cash generated from core business operations (e.g., sales revenue minus operating expenses)
Operating profit, often referred to as operating income, is the most important metric for a company's business over a specific period. Operating profit precisely names the profit before interest, taxes, and depreciation. The metric, also referred to as "operating income," thus describes the operational performance before investment costs.
The operating return on sales is the ratio of operating profit to sales revenue.
Function that allows car manufacturers to provide customers with software updates for the vehicle without the need to visit a service partner. The respective updates are transmitted to the vehicle via the mobile network.
P
The payout ratio is the sum of dividends attributable to common and preferred shares in relation to the net income attributable to Volkswagen AG shareholders. The payout ratio provides information about the distribution of earnings.
Plug-in hybrid is the common term for a plug-in hybrid electric vehicle, abbreviated PHEV. Traditionally, a drive is called hybrid when two drive technologies – each motor and energy storage system – are combined in a vehicle. In automotive engineering, the combination of an internal combustion engine with an electric motor has become established in PHEV models. Typical for so-called parallel hybrids, which combine an internal combustion engine and an electric motor into a drive unit: The electric drive can be used locally emission-free as the sole drive or support the combustion engine both in partial load operation and with additional boost power during stronger acceleration. The electric drive also serves as a generator for recuperation, converting kinetic energy into electricity and storing it in a lithium-ion battery. The battery can be charged externally at a charging station or socket in plug-in hybrids.
Platform architecture for conventionally powered vehicles with longitudinally mounted engines. This platform works with the E³ architecture. At the same time, the PPC allows for gradual electrification – initially in the form of mild hybrids. The PPC combines great variability and state-of-the-art technology with high economic profitability.
New vehicle platform for electrically powered vehicles in the premium, sports, and luxury classes. The components and functions of this platform are specifically tailored to the high requirements in this segment. High synergies are achieved particularly between the Audi, Porsche, and Bentley brands with this platform.
The pre-tax return on equity represents the ratio of profit before tax to average equity for a period in percentage terms. It is an indicator of the company's profitability and shows the return on equity.
The price-earnings ratio is calculated by dividing the year-end price per share class by the earnings per share. It reflects the earnings power per share and provides information about its development in a multi-year comparison.
R
Systematic evaluation of companies regarding their creditworthiness. The rating is expressed through rating levels, which are defined differently by various rating agencies.
The R&D ratio in the Automotive Division is the ratio of total research and development costs to sales revenue. The ratio corresponds to direct expenses on efforts to develop, design, and improve products, services, technologies and processes.
Return on sales is defined as the ratio of profit before tax to sales revenue within a period, expressed as a percentage. It shows the amount of profit generated per unit of sales. The return on sales provides information on the profitability of the entire business activity before deduction of taxes on income.
S
Sales at Volkswagen generally refer to the number of vehicles that the Group sells to the trade network (importers, dealers, and distribution partners).
This means it reflects sales to the dealer organization, not necessarily to the end customer.
The Scalable Systems Platform (SSP) is a future-oriented mechatronic platform for electrically powered and fully digitized vehicles based on a unified software architecture. Innovative technologies and scalability enable high synergies from small cars to luxury cars with the required product differentiation between the volume, progressive, and sports luxury brand groups while simultaneously reducing investment needs.
Vehicles designed and developed with a focus on software. Highly digitized with high-performance computers and modern embedded computer systems. Their functions can be centrally controlled, updated, and expanded over their lifetime. Their software flexibly connects to various hardware – from control units to sensors like cameras and lidar. SDVs are considered the basis for safe, intelligently communicating vehicle fleets, a new customer experience in infotainment, and highly automated driving functions.
T
The tax rate is the percentage ratio between income and profit taxes and profit before taxes. The tax rate shows the proportion of profit that must be paid as taxes.
The new WLTP test procedure (Worldwide Harmonized Light Vehicles Test Procedure) was developed based on globally collected driving data and covers driving situations from city traffic to highway driving. Unlike the NEFZ, the cycle used in the WLTP (Worldwide Harmonized Light Vehicles Test Cycle) is much more dynamic – it has significantly more acceleration and braking events than its predecessor. In addition to the actual driving profile, the measurement procedure was also internationally standardized and adapted to current vehicle technology. This included a variety of topics, such as the question of at what temperature a vehicle should be measured or how the correct tire pressure should be defined. The goal was to cover reality as accurately as possible, reduce possible variances as much as possible, and keep the testing effort as low as possible. As with the NEFZ, the repeatability and conformity of the measurement procedure must be ensured worldwide: A vehicle of the same type must achieve the same test result at any time in all parts of the world when the measurement procedure is correctly followed. For this, the procedure must reliably and representatively determine the fuel consumption and emissions of a vehicle.
Z
Vehicles that do not emit harmful emissions from combustion gases during operation. Zero-emission vehicles include pure electric cars (BEV) or fuel cell vehicles.
Annual General Meeting Glossary
Selected terms related to the Annual General Meeting – explained simply
A
The list of topics and proposed resolutions to be voted on at the Annual General Meeting.
Statutory meeting of the shareholders of a stock corporation (AG) where key decisions are made, e.g. on the appropriation of profits, the approval of the actions of the Board of Management and Supervisory Board or capital measures.
The shareholders (or their proxies) vote at the Annual General Meeting on whether to approve the actions of the Board of Management and Supervisory Board for the past fiscal year. The result reflects the shareholders’ confidence in the board members.
C
A measure to change the share capital, which generally requires the approval of the Annual General Meeting – such as a capital increase or decrease, e.g. by issuing new shares.
The formal invitation to the Annual General Meeting, usually by the Board of Management, specifying the place, time and agenda.
The bank where a shareholder holds his/her shares. It plays a central role in registering for the Annual General Meeting.
D
The part of the profit that is distributed to shareholders. The Annual General Meeting resolves on the amount of the dividend.
P
With a proxy, a shareholder can transfer his/her voting rights to a third party, e.g. to a company proxy holder or a shareholders’ association.
R
The date by which a shareholder must hold shares in order to be able to attend and vote at the Annual General Meeting (in Germany: 22nd day before the Annual General Meeting).
S
An online platform via which shareholders (or their proxies) can exercise their rights, especially at virtual Annual General Meetings.
V
An Annual General Meeting that is held entirely online without the physical presence of shareholders (or their proxies). Attendance, questioning and voting take place via an online platform in accordance with legal requirements.
The right of a shareholder to vote on resolutions at the Annual General Meeting. The number of votes depends on the number of ordinary shares held.