NewWorld Development Company Limited
FINANCIAL SECTION
134
4 FINANCIAL RISK MANAGEMENT AND FAIR VALUE ESTIMATION
(continued)
(d) Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
The Group generally obtains long-term financing to on-lend or contribute as equity to its subsidiaries, joint
ventures and associated companies to meet their funding needs in order to provide more cost efficient
financing. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, issue or repurchase shares, raise new debt financing or sell assets to reduce debt.
The Group monitors capital on the basis of the Group’s gearing ratio and makes adjustments to it in light of
changes in economic conditions and business strategies. The gearing ratio is calculated as net debt divided by
total equity. Net debt is calculated as total borrowings (excluding loans from non-controlling shareholders) less
cash and bank balances.
The gearing ratios at 30 June 2015 and 2014 were as follows:
2015
2014
HK$m
HK$m
Consolidated total borrowings
(excluding loans from non-controlling shareholders)
113,004.3
116,562.0
Less: cash and bank balances
(59,465.2)
(61,823.2)
Consolidated net debt
53,539.1
54,738.8
Total equity
222,358.0
200,276.5
Gearing ratio
24.1%
27.3%
The decrease in gearing ratio as at 30 June 2015 was primarily resulted from the increase in equity contributed
by profit for the year.
(e) Fair value estimation
The Group’s financial instruments that are measured at fair value are disclosed by levels of the following fair
value measurement hierarchy:
•
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
•
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
•
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)
(level 3).
