IBERSOL | Annual Report 2020

ANNUAL REPORT 2020 3.2 CAPITAL RISK a) Gearing ratio The company aims to maintain an equity level suitable to the characteristics of its main business (cash sales and account payable) and to ensure continuity and expan- sion. The capital structure balance is monitored based on the gearing ratio (defined as: (net remunerated debt / net remunerated debt + equity)) in order to place the ratio within a 50%-75% range. As at 31 December 2020 and 2019 the gearing ratio was of 74% and 66%, respec- tively, as follows: dec. 2020 dec. 2019 Lease liabilities 329.014.533 339.983.201 Bank loans 165.068.581 121.162.682 Other financial assets -2.442.186 -15.626.772 Cash and bank deposits -50.550.293 -38.424.757 Net indebtedness 441.090.633 407.094.354 Equity 156.405.905 214.228.476 Total Capital 597.496.538 621.322.830 Gearing ratio 74% 66% b) Risk of franchise agreements In restaurants where it operates with international brands, the group enters into long-term franchise agreements: 20 years for Burger King and 10 years for Pizza Hut and KFC, which are renewable for another 10 years at the franchise’s option, provided certain obligations have been fulfilled. It has become practical for these contracts to be renewed. However, nothing obliges the franchisees to do so, so the risk of non-renewal may be verified. 339