Return on sales (ROS or the ratio of operating result to total revenues) and underlying free cash flow on revenues (FCR) are our two key financial performance indicators. The divisions use them to steer their business and we also use them for short- and long-term internally agreed targets. Group ROS increased from 8.4% in 2009 to 12.0% in 2010. This reflects the improvement in the overall business situation, which included a sharp increase in total revenues. FCR also developed positively in line with the good business development, increasing from 11% in 2009 to 18%. We refer to the average, or the arithmetic mean, of the two indicators ROS and FCR as the “Merck Business Target” (MBT). It is used for performance-based short- and long-term compensation systems and amounted to 15% compared to 9.7% in 2009. Both indicators, ROS and FCR, are presented by division in the Segment Reporting. For EBITDA, as per the definition, depreciation and amortization of non-current assets are added back to earnings before interest and taxes (EBIT). For Merck, EBITDA is also an important financial indicator. Since the acquisition of Serono, amortization of intangible assets has been lowering the operating result. Owing to the Millipore acquisition, these amortization expenses increased further in 2010. When high impairment losses are also incurred, EBIT or the operating result alone does not reflect the actual earning power of the business. EBITDA increased by nearly 50% from EUR 1,625 million in 2009 to EUR 2,457 million in 2010.
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