Annual Report 2007 - Hmdatalink.com hm datalink

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Notes to the consolidated financial statementsfor the year ended 31 December 200730. CAPITAL RISK MANAGEMENT (Continued)Gearing ratio (Continued)The gearing ratio at the balance sheet date was as follows:2007 2006HK$’000HK$’000Debt (i) 329,790 716,308Equity (ii) 2,441,440 1,030,157Debt to equity ratio 14% 70%(i)Debt comprising borrowings, convertible bonds and amount due to immediate holding company as detailed innotes 17(b), 19 and 22 respectively.(ii)Equity includes all capital and reserves attributable to equity holders of the Company.The significant improvement in the gearing ratio is mainly due to issue of ordinary shares for cash andconversion of convertible bonds to ordinary shares during the year.31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESExposure to market risk (including interest rate risk and currency risk), credit and liquidity risks arises inthe normal course of the Group’s business. Market risk exposures are measured using sensitivity analysis.There has been no change to the Group’s exposure to market risks or the manner in which it manages andmeasures the risk.These risks are limited by the Group’s financial management policies and practices described below.Credit riskThe Group’s credit risk is primarily attributable to trade receivables. Management has a credit policy in placeand the exposures to these credit risks are monitored on an ongoing basis.In respect of trade and other receivables, credit evaluations are performed on customers requiring credit overa certain amount. These evaluations focus on the customer’s past history of making payments when due andcurrent ability to pay, and take into account information specific to the customer as well as pertaining to theeconomic and business environment in which the customer operates. Normally, the Group does not obtaincollateral from customers.At the balance sheet date, all the trade receivables were due from the Group’s associate.GEELY AUTOMOBILE HOLDINGS LIMITED103ANNUAL REPORT 2 0 0 7
Notes to the consolidated financial statementsfor the year ended 31 December 200731. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)Credit risk (Continued)Financial assets at fair value through profit or loss represented forward foreign exchange contracts notused for hedging. The forward foreign exchange contracts are with counterparties of sound credit standing(established banks). Given their high credit standing, the management does not expect any investmentcounterparty to fail to meet its obligations.The maximum exposure to credit risk without taking account of any collateral held is represented by thecarrying amount of each financial asset, including financial assets at fair value through profit or loss, in thebalance sheet after deducting any impairment allowance. The Group does not provide any other guaranteeswhich would expose the Group to credit risk.Liquidity riskIndividual operating entities within the Group are responsible for their own cash management, includingshort term investment of cash surpluses and the raising of loans to cover expected cash demands. TheGroup’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants,to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from majorfinancial institutions to meet its liquidity requirements in the short and longer term.The following table details the remaining contractual maturities at the balance sheet date of the Group’sfinancial assets and financial liabilities, which are based on contractual undiscounted cash flows includinginterest and the contractual maturities.GEELY AUTOMOBILE HOLDINGS LIMITED104ANNUAL REPORT 2 0 0 7
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