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reliance on additional borrowing or usage
of existing cash. Free cash flow is a measure of the net cash generated
which is availble for debt repayment and investment in strategic
opportunities.
The Group uses free cash flow as a performance
measure when making internal comparisons of Divisions’ and Business
Units’ results. Free cash flow of the Divisions and Business Units
uses the same definition as that for the Group, however no dividends,
tax or financial receipts or payments are included in the Division
and Business Unit calculation.
Free cash flow
The following summarizes the Group’s contractual
obligations and other commercial commitments and the effect such
obligations and commitments are expected to have on the Group’s
liquidity and cash flow in future periods.
The Group expects to fund the operating leases
and longterm Research & Development commitments with internally
generated resources.
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The Novartis Group has no unconsolidated special
purpose financing or partnership entities. See also note 27 of the
consolidated financial statements for a description of the unconsolidated
share compensation foundation.
Earnings before interest, tax, depreciation
and amortization (EBITDA)
The Group defines EBITDA as operating income
before depreciation of tangible fixed assets and amortization of intangible
assets, including goodwill, and any related impairment charges.
The breakdown of the Group EBITDA into Divisions/Business
Units is as follows:
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