I need to calculate the Net Debt / EBITDA ratio for 2022 and 2023 to determine the trend. First, let me identify the relevant data points. **For Net Debt calculation:** Net Debt = Total Debt - Cash and Cash Equivalents Total Debt = Short-term Borrowings + Current Portion of Long-term Borrowings + Long-term Borrowings **2023 (as of 2023-01-01):** - Short-term Borrowings: 4,446,000,000 EUR - Current Portion of Long-term Borrowings: 3,097,000,000 EUR - Long-term Borrowings: 19,374,000,000 EUR - Total Debt = 4,446 + 3,097 + 19,374 = 26,917,000,000 EUR - Cash and Cash Equivalents: 10,155,000,000 EUR - Net Debt (2023) = 26,917 - 10,155 = 16,762,000,000 EUR **2022 (as of 2022-01-01):** - Short-term Borrowings: 2,299,000,000 EUR - Current Portion of Long-term Borrowings: 1,781,000,000 EUR - Long-term Borrowings: 23,714,000,000 EUR - Total Debt = 2,299 + 1,781 + 23,714 = 27,794,000,000 EUR - Cash and Cash Equivalents: 8,254,000,000 EUR - Net Debt (2022) = 27,794 - 8,254 = 19,540,000,000 EUR **For EBITDA:** I need to calculate EBITDA from the income statement data. EBITDA is typically approximated as: EBITDA = Profit/Loss from Operating Activities + Depreciation and Amortization + other adjustments Actually, looking at the cash flow data, I can work backwards. But let me use a more standard approach. From the data: - Profit Loss From Operating Activities (EBIT): 17,510,000,000 EUR (2022) - Depreciation And Amortisation Expense: 7,205,000,000 EUR (2022) EBITDA = EBIT + Depreciation and Amortization = 17,510 + 7,205 = 24,715,000,000 EUR for 2022 period Wait, I need to be careful about the periods. The dates 2022-01-01 to 2023-01-01 represent the year 2022 (calendar year 2022, reported at start of 2023). And 2021-01-01 to 2022-01-01 represents year 2021. So for **2022 performance (period 2022-01-01 to 2023-01-01):** - Profit Loss From Operating Activities: 17,510,000,000 EUR - Depreciation And Amortisation Expense: 7,205,000,000 EUR - EBITDA (2022) = 17,510 + 7,205 = 24,715,000,000 EUR For **2021 performance (period 2021-01-01 to 2022-01-01):** - Profit Loss From Operating Activities: 12,341,000,000 EUR - Depreciation And Amortisation Expense: 7,063,000,000 EUR - EBITDA (2021) = 12,341 + 7,063 = 19,404,000,000 EUR Now I need Net Debt at the END of each period, which corresponds to the balance sheet dates. **Net Debt at end of 2022 (2023-01-01):** 16,762,000,000 EUR **Net Debt at end of 2021 (2022-01-01):** 19,540,000,000 EUR **Net Debt / EBITDA for 2022:** 16,762 / 24,715 = 0.678x **Net Debt / EBITDA for 2021:** 19,540 / 19,404 = 1.007x Wait - I need to reconsider. S&P typically uses average net debt or year-end net debt with that year's EBITDA. Let me check if the periods align properly. Actually, looking more carefully at S&P methodology: they typically use "adjusted" metrics. But based on the simple calculation: For 2022 (using 2023-01-01 net debt / 2022 EBITDA): 16,762 / 24,715 = 0.678x For 2021 (using 2022-01-01 net debt / 2021 EBITDA): 19,540 / 19,404 = 1.007x The gap = 0.678 - 1.007 = -0.329x This is approximately -0.33x, which is slightly outside the ±0.3x range for "Stable". Since the ratio decreased by more than 0.3x, this would be "Improving" (lower leverage is better/improving). However, let me double-check by using a more consistent approach. Sometimes net debt/EBITDA is calculated with end-of-period debt and that same period's EBITDA. Actually, let me reconsider: if we use beginning of year net debt with that year's EBITDA: For 2022: Net Debt at 2022-01-01 = 19,540; EBITDA 2022 = 24,715 → 19,540/24,715 = 0.791x For 2021: Net Debt at 2021-01-01 would need to be calculated. Let me calculate 2021-01-01 balances from the data: - Short-term Borrowings 2021-01-01: Not directly given, but we have 2022-01-01 values - Actually, looking at the data, we only have 2022-01-01 and 2023-01-01 balance sheets. Given the data constraints, the most logical approach is: - 2022 ratio: Net Debt at 2022-01-01 / EBITDA 2022 = 19,540 / 24,715 = 0.791x - 2021 ratio: Net Debt at 2021-01-01 / EBITDA 2021 But we don't have 2021-01-01 debt. Let me use another approach: year-end net debt with that year's EBITDA. - 2022 year-end (2023-01-01) net debt / 2022 EBITDA = 16,762 / 24,715 = 0.678x - 2021 year-end (2022-01-01) net debt / 2021 EBITDA = 19,540 / 19,404 = 1.007x Gap = 0.678 - 1.007 = -0.329x Or comparing the other way: 1.007 - 0.678 = 0.329x Since |0.329| > 0.3, and the ratio decreased (improved), this is "Improving". But wait - let me also check if we should use 2021 and 2022 as the years being compared, where "2022" in the question means the year ended 2023-01-01 and the prior year is 2021 ended 2022-01-01. Actually, re-reading: "estimate S&P's adjusted leverage trend for 2022" - this means comparing 2022 vs 2021. Let me verify my EBITDA calculation. S&P adjusted EBITDA typically adds back certain items. Looking at the cash flow statement approach: Cash Flows From Operating Activities = 17,460,000,000 EUR (2022) This includes working capital changes and other items. A cleaner EBITDA from the income statement: Revenue And Other Income: 133,687,000,000 Total Purchases Services And Other Costs: 102,529,000,000 Employee Benefits Expense: 3,015,000,000 Depreciation And Amortisation: 7,205,000,000 Other operating items... Actually, let me use: EBITDA ≈ Profit Loss From Operating Activities + Depreciation And Amortisation = 17,510 + 7,205 = 24,715 for 2022 = 12,341 + 7,063 = 19,404 for 2021 And for Net Debt, let me also include lease liabilities as debt-like (which S&P typically does): **2023-01-01:** - Debt: 26,917 - Current Lease Liabilities: 884 - Noncurrent Lease Liabilities: 4,067 - Cash: 10,155 - Net Debt (with leases): 26,917 + 884 + 4,067 - 10,155 = 21,713 **2022-01-01:** - Debt: 27,794 - Current Lease Liabilities: 948 - Noncurrent Lease Liabilities: 4,389 - Cash: 8,254 - Net Debt (with leases): 27,794 + 948 + 4,389 - 8,254 = 24,877 2022 ratio: 21,713 / 24,715 = 0.879x 2021 ratio: 24,877 / 19,404 = 1.282x Gap: 0.879 - 1.282 = -0.403x → Improving (magnitude > 0.3, and decreasing) Even with this broader definition, it's improving. Let me try yet another common S&P approach - using Funds From Operations (FFO) or a more standard "Adjusted Debt" and "Adjusted EBITDA": Actually, the simplest and most common interpretation without making too many adjustments: Net Debt / EBITDA: - 2022: 16,762 / 24,715 = 0.68x - 2021: 19,540 / 19,404 = 1.01x Year-on-year change: -0.33x (approximately) Since the decrease is greater than 0.3x in magnitude, and lower leverage is improving, the trend is **Improving**. Let me also verify if I should use 2022 beginning net debt with 2022 EBITDA vs 2021 beginning net debt with 2021 EBITDA. But we don't have 2021 beginning net debt. Using end-of-period (or beginning of next period) with that year's EBITDA is common in annual report analysis. Final calculation: - 2022: 16,762 / 24,715 = 0.678 - 2021: 19,540 / 19,404 = 1.007 - Difference: |0.678 - 1.007| = 0.329 > 0.3 - Direction: decreasing = Improving Improving