NOTES TO FINANCIAL STATEMENTS
37.3 Fair values of financial assets and liabilities
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arms length transaction. Notes to the Financial Statements for the year ended June 30, 2008
(b) Credit risk
Credit risk represents the risk of a loss if the counter parties fail to perform as contracted. The Company's credit risk is primarily attributable to its receivables and its balances at bank. The credit risk on liquid fund is limited because the counter parties are banks with reasonably high credit ratings. Out of the financial assets aggregating Rs. 53,830,930 the financial assets which are subject to credit risk amount to Rs. 50,812,290.
Significant concentration of credit risks on amounts due from Government agencies and autonomous bodies amounting to Rs. 30,564,835 is covered to a certain extent, by restricting current supplies on cash basis. Credit risk on private sector other than retail sales is covered to the maximum possible extent through legally binding contracts. Furthermore, the Company attempts to control credit risk by monitoring credit exposures, limiting transactions with specific customers and continuing assessment of credit worthiness of customers. (c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. Due to effective cash management and planning policy, the Company aims at maintaining flexibility in funding by keeping committed credit lines available.
(d) Cash flow and fair value interest rate risk
As the Company has no significant interest bearing assets, the Company's income and operating cash flows are substantially independent of changes in market interest rates.
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