2012 Annual Report - Domino's Pizza

32.1.1 Gearing ratio
Debt (i) 14,043 15,544
Cash and cash equivalents (40,340) (28,085)
Net (cash)/debt (26,297) (12,541)
2012
$’000
2011
$’000
Equity (ii) 117,041 104,916
Net debt to equity ratio (22%) (12%)
The gearing ratio at the end of the reporting period was as follows:
(i) Debt is defined as long-term and short-term borrowings, as detailed in note 23.
(ii) Equity includes all capital and reserves that are managed as capital.
32.2 Significant accounting policies
Details of the significant accounting policies and methods adopted (including the criteria for recognition, the bases for recognition of income and expenses)
for each class of financial asset, financial liability and equity instrument are disclosed in note 3.
32.3 Categories of financial instruments
WEIGHTED
AVERAGE
EFFECTIVE
INTEREST RATE
%
2012
$’000
WEIGHTED
AVERAGE
EFFECTIVE
INTEREST RATE
%
Financial assets
Trade and other receivables - 21,018 - 18,615
Loans receivables 9.72 7,887 8.06 11,298
Other financial assets - 8 - 12
Cash and cash equivalents 3.90 40,340 2.67 28,085
Financial guarantee contracts 6.25 252 6.25 566
2011
$’000
Financial liabilities
Euro loan 3.00 13,717 5.22 15,035
Other financial liabilities - 32,988 - 29,938
Finance lease liability 5.27 108 5.18 150
Other loans 4.31 218 4.23 360
Financial guarantee contracts 6.25 252 6.25 566
32.4 Financial risk management objectives
The Group’s finance department co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to
the operations of the Group in line with the Group’s policies. These risks include market risk (including currency risk, fair value interest rate risk and price
risk), credit risk, liquidity risk and cash flow interest rate risk.
The Group seeks to minimise the effects of the above mentioned risks, by using derivative financial instruments to hedge these risk exposures. The use
of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles on foreign exchange risk,
interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance
with policies and exposure limits is reviewed by the Board of Directors. The Group does not enter into or trade financial instruments, including derivative
financial instruments, for speculative purposes.
The Group’s management and Board of Directors’ review annually the risks and policies implemented to mitigate risk exposures.
ANNUAL REPORT 2012 DOMINO’S PIZZA ENTERPRISES LIMITED 67