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Notes to the Consolidated Financial Statements

31st March 2018

3 FINANCIAL RISK MANAGEMENT (CONTINUED)

3.2 Capital risk 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.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend
paid to shareholders, raise or repay bank borrowings, issue new shares or sell assets to reduce
debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total
borrowings net of cash and cash equivalents divided by total equity as shown in the consolidated
balance sheet.

The gearing ratios at 31st March 2018 and 2017 were as follows:

2018 2017
HK$’000 HK$’000

Cash and cash equivalents (Note 22) 279,520 787,201
Borrowings (Note 24) (133,718) (174,600)
Net surplus cash 145,802 612,601

Total equity 1,729,229 1,846,491

Gearing ratio Not applicable Not applicable

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below.

ALCO HOLDINGS LIMITED ANNUAL REPORT 2018 83