GHL System Berhad Annual Report 2017

GHL SYSTEMS BERHAD 126 NOTES TO THE FINANCIAL STATEMENTS 31 December 2017 CONT’D 30. CAPITAL AND FINANCIAL RISK MANAGEMENT (a) Capital management The primary objective of the capital management of the Group is to maintain a strong capital base and safeguard the ability of the Group to continue as a going concern whilst maintaining an optimal capital structure, so as to maximise shareholders value. The management reviews the capital structure by considering the cost of capital and the risks associated with the capital. No changes were made in the objectives, policies or procedures during the financial years ended 31 December 2017 and 31 December 2016. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Total capital managed at Group level, which comprises shareholders’ funds, cash and cash equivalents and bank borrowings. The gearing ratios are as follows: Group Company 2017 2016 2017 2016 RM RM RM RM Total borrowings 34,186,239 38,123,724 296,639 102,369 Less: Cash and cash equivalents (99,945,382) (76,887,102) (16,085,617) (8,910,398) Net cash (65,759,143) (38,763,378) (15,788,978) (8,808,029) Total equity 274,195,392 259,145,211 76,624,819 75,560,978 Gearing ratio - - - - (b) Financial risk management The financial risk management policy of the Group and of the Company is to ensure that adequate financial resources are available for the development of the operations of the Group and of the Company whilst managing its financial risks, including credit risk, liquidity and cash flow risks, interest rate risk and foreign currency risk. The Group and the Company operate within clearly defined guidelines that are approved by the Board and the Group’s and the Company’s policy is not to engage in speculative transactions. (i) Credit risk Cash deposits and trade and other receivables could give rise to credit risk which requires the loss to be recognised if a counter party fails to perform as contracted. The counter parties are creditworthy counterparties. It is the policy of the Group to monitor the financial standing of these counter parties on an ongoing basis to ensure that the Group is exposed to minimal credit risk. The primary exposure of the Group to credit risk arises through its trade receivables. The trading terms of the Group with its customers are mainly on credit, except for new customers, where deposits in advance are normally required. Overdue balances are reviewed regularly by senior management. The credit risk concentration profile has been disclosed in Note 19 to the financial statements.