114 NOTEs TO THE FINANCIAL sTATEMENTs  36. FINANCIAL AND CAPITAL RIsk MANAGEMENT FINANCIAL RISK MANAGEMENT CAPITAL RISK MANAGEMENT *  For the purposes of the debt to EBITDA ratio, underlying EBITDA is adjusted for specific items of a non-recurring nature and excludes any  unrealised profit/(loss) arising from mark to market revaluations of financial instruments. In respect of the first 12 month period after the  acquisition of any acquired business, EBITDA will include acquired EBITDA in respect of the acquired business for any period not covered in  the consolidated EBITDA of the Group.  The net debt to EBITDA ratio for the Group at 30 June 2013 and 24 June 2012 is as follows: Where excess funds arise with respect to the funds required to enact the Group’s business strategies, consideration is given to  increased dividends or buy back of shareholder equity. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, buy  back shareholder equity, issue new shares or sell assets to reduce debt. The Group reviews the capital structure to ensure: The capital structure of Group entities is monitored using net debt to EBITDA (earnings before interest, tax, depreciation and  amortisation) ratio. The ratio is calculated as net debt divided by underlying EBITDA. Net debt is calculated as total interest  bearing liabilities less cash and cash equivalents. Where interest bearing liabilities are denominated in a currency other than the  Australian dollar functional currency, and the liability is hedged into an Australian dollar obligation, the liability is measured for  financial covenant purposes as the hedged Australian dollar amount. The Group’s risk management activities for interest rate and foreign exchange exposures are carried out centrally by Fairfax  Media Group Treasury department. The Group Treasury department operates under policies as approved by the Board.  The Group Treasury department operates in co-operation with the Group’s operating units so as to maximise the benefits  associated with centralised management of Group risk factors. The Group uses derivatives in accordance with Board approved policies to reduce the Group’s exposure to fluctuations in  interest rates and foreign exchange rates. These derivatives create an obligation or right that effectively transfers one or more  of the risks associated with an underlying financial instrument, asset or obligation. Derivative instruments that the Group uses to  hedge risks such as interest rate and foreign currency movements include: The Group’s principal financial instruments, other than derivatives, comprise cash, short term deposits, bills of exchange  and bank loans. The main purpose of these financial instruments is to manage liquidity and to raise finance for the Group’s  operations. The Group has various other financial instruments, such as trade and other receivables and trade and other  payables, which arise directly from its operations. • cross currency swaps; • interest rate swaps; • forward foreign currency contracts; and • forward rate agreements. • sufficient finance capacity for the business is maintained at a reasonable cost; and • sufficient funds are available for the business to implement its capital expenditure and business acquisition strategies. NOTE 2013 $’000 2012 $’000 Net debt for financial covenant purposes 19  154,493   914,098  EBITDA *  366,474   506,022  Net debt to EBITDA ratio  0.42   1.81  FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013