Kimlun Corporation Berhad Annual Report 2017

Annual Report 2017 113 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 (cont’d) 34. Financial risk management objectives and policies (cont’d) (d) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of Group’s entities. The foreign currencies in which these transactions are denominated are mainly Singapore Dollar (“SGD”), United States Dollar (“USD”) and Euro (“EUR”). The Group did not enter into any forward currency contracts during the financial years ended 31 December 2017 and 2016. The Group is also exposed to currency translation risk arising from its investments in foreign operation in Singapore. The Group’s net investments in Singapore is not hedged as currency positions in SGD is considered to be long-term in nature. The Group does not expect any material effect on the Group’s profit net of tax and equity arising from the effect of reasonably possible changes to foreign currency exchange rates at the end of the reporting period. 35. Capital management The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2017 and 2016. The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group includes within net debt, loans and borrowings less cash and bank balances whereas total capital comprises equity attributable to owners of the Company. The gearing ratios as at 31 December 2017 and 2016 are as follows : Note 2017 2016 RM RM Group Loans and borrowings 24 129,602,722 115,035,316 Less: Cash and bank balances 23 (86,571,902) (79,025,354) Net debt 43,030,820 36,009,962 Total equity 607,792,238 539,262,844 Capital and net debt 650,823,058 575,272,806 Gearing ratio 6.61% 6.26%