D-Link 2014 Annual Report Download - page 85

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57
D-LINK CORPORATION AND SUBSIDIARIES
Notes to the consolidated financial statements
(Continued)
Transactions in derivative financial instruments adopt economic hedge to prevent currency
risk from financial assets and liabilities denominated in foreign currencies. The gains and
losses of hedged items are expected to offset gains or losses that arise from the fluctuations
in exchange rates. The valuation gains and losses on financial assets consist of transactions
that do not qualify as hedging accounting.
(ii) Interest rate risk
The Consolidated Company is exposed to interest rate risk arising from its borrowing at
floating rate, such that changes in interest rates would affect the future cash flows.
However, interest from financial assets remains higher than the interest from financial
liabilities and therefore, there is no significant interest rate risk in the Consolidated
Company.
(iii) Other price risk
The Consolidated Company holds both money market funds and bond funds, where their
prices are affected by changes in mutual funds. The abovementioned mutual funds are
widely used as fixed income investments in domestic, with large market scale, stable
market prices, and high liquidity. The Consolidated Company is held for the purpose of
short-term capital allocation with a period of approximately 3 months. The finance
department will monitor the changes in market and dispose the investments, if necessary.
(z) Capital management
The Consolidated Company’s fundamental management objectives is to maintain a strong capital base.
Capital consists of ordinary shares, capital surplus, retained earnings and other equities. The Board of
Directors monitors the capital structure regularly and selects the optimal capital structure by
considering the capital scale, overall operating environment, operating characteristics of the industry in
order to support future development of the business. The current aim for debt-to-equity ratio is set
within 100%. As of the reporting date, the debt-to-equity ratio is considered appropriate.
Debt-to-equity ratio:
December 31,
2014
December 31,
2013
Total liabilities $ 12,330,526 10,861,439
Less: cash and cash equivalents (3,613,497)
(3,492,550)
N
et deb
t
$ 8,717,029
7,368,889
Total equity
$ 13,201,632
13,596,350
Debt to equity ratio at 31 December
66.03%
54.20%
As of December 31, 2014, the methods of Consolidated Company’s capital management remained
unchanged.