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Notes to the Consolidated Financial Statements

31st March 2017

3 FINANCIAL RISK MANAGEMENT (CONTINUED)

3.1 Financial risk factors (Continued)

(a) Market risk (Continued)

(ii) Cash flow and fair value interest rate risk (Continued)

As at 31st March 2017 and 2016, the Group’s borrowings at variable rates were
denominated in USD.

At 31st March 2017, if interest rates on all borrowings had been 100 basis points
higher/lower with all other variables held constant, post-tax profit for the year would
have been HK$1,746,000 (2016: HK$2,328,000) lower/higher, mainly as a result of
higher/lower interest expense on floating rate borrowings.

At 31st March 2017, if interest rates on all interest-bearing bank and cash deposits had
been 100 basis points higher/lower with all other variables held constant, post-tax profit
for the year would have been HK$7,864,000 (2016: HK$15,910,000) higher/lower due
to interest income earned on market interest rate.

The total bank loans held by the Group as at 31st March 2017 and 2016 were all with
floating rates.

(b) Credit risk

Credit risk arises from cash and cash equivalents and short-term deposits with banks
and financial institutions, loans and receivables, as well as credit exposures to customers,
including outstanding receivables. Management has a credit policy in place and the
exposures to these credit risks are monitored on an ongoing basis.

The Group’s cash and short-term deposits are placed with reputable banks and financial
institutions. For credit exposures from customers, management assesses the credit quality of
each individual major customer, taking into account its financial position, past experience and
other factors.

ALCO HOLDINGS LIMITED ANNUAL REPORT 2017 71