3rd ICAI 2024

International Conference on Automotive Industry 2024

Mladá Boleslav, Czech Republic

WACC, indicating that the sector is profitable and may be of interest to investors. The cost of capital has even been declining slightly in the last years of the analyzed period. The second objective was to examine the relationship between ROIC and growth. We found that growth is cyclical and repeats after about 3 to 5 years, ROIC is much more stable. Related to this is the investments rate, which can have an impact on a company’s growth in combination with multiple factors. Companies that invested more did not have higher growth, however all the companies studied that had an investment rate below 20 % did indeed have low growth at the same time. 4.2 Limitations The limitation may be, for example, in the calculation of WACC, as there is no unanimous agreement among academics or practitioners on how to calculate these indicators. An alternative calculation for WACC is offered by, for example, Olson and Pagano (2023), who publish a new method, EACC (Effective Annual Cost of Capital), which is consistent with existing methods of calculating WACC, uses data from the firm’s financial statements and needs less subjective restatements. There are also several ways to calculate ROIC. For the purpose of this paper and considering the industry and the available data, we have chosen to include research and development expenses in the invested capital, however, Jahodová (2017) lists other costs that can have a long-term impact on the company’s development, such as advertising and promotion costs, employee training costs, and costs for building a customer portfolio. Including these expenses could show a more realistic picture of the profitability of the company’s invested capital. Furthermore, the chosen automotive sector, which consists of automobiles and automotive parts, may have an impact; these sectors may have different values, which we are now essentially averaging. Acknowledgements The article is prepared as one of the outputs of the research project of the Faculty of Finance and Accounting of the Prague University of Economics and Business, which is implemented under the institutional support of the Prague University of Economics and Business IP100040. Disclosure statement: No potential conflict of interest was reported by the authors.

75