FINANCIAL RESOURCES AND RISK MANAGEMENT POLICIES
25% (2010: 44%) of our Company’s consolidated assets as of 31.12.2011 are financed through equities, and 75% (2009: 56%) of it through foreign resources. Financing is performed through foreign resources for the investments regarding the continuance of existing operation and the Company strategies, and for operating capital needs. Approximately 55% (2010: 58%) of financing from foreign resources composed of trade activities, and 45% (2010: 42%) of financial receivables. Within this context, our Company is in cooperation with domestic financial establishments.
Due to trade operations and utilization of financial instruments for these operations, our Company is exposed to interest rate risk and foreign exchange rate risk as loan risks, liquidity risks and risks generating from financial markets.
Risks mentioned are managed in accordance with principles listed below:
CREDIT RISK
Credit risk, is the risk of a customer or the other party not being able to perform the liabilities stated in the agreement. Our Company’s collection risk is basically generated from trade receivables. Bad debt risk is fairly low, since a significant part of trade receivables are to be collected from the world’s and Turkey’s prominent chassis truck producers and public institutions, and since export product payments are collected either in cash or via letters of credit.
LIQUIDITY RISK
Our Company manages liquidity risk via matching groups of financial assets and liabilities by pursuing cash flow regularly.
Prudent liquidity risk management represents keeping sufficient cash, using sufficient loan operations and fund resources, and the power to close out market positions.
Risk of funding existing and possible future payable needs, is managed by accessing reliable creditors in adequate numbers.
INTEREST RATE RISK
Due to its assets earning interest and liabilities paying interest, our Company is open to interest rate risk, which generates from changes in interest rates. This risk is managed in the balance sheet by balancing amount and terms of interest rate sensitive assets and liabilities, or if necessary, through derivatives.
FOREIGN EXCHANGE RATE RISK
The Company experiences foreign exchange rate risk due to various income and cost items of foreign currencies, and due to foreign payables, receivables, and financial payables generating from these items.
When it is required in terms of financial assets and liabilities in terms of foreign currencies, the Company keeps the risk at a reasonable level by buying and selling foreign currencies at spot rates.
In order to minimize foreign exchange rate risk in the balance sheet, the Company occasionally keeps its idle cash as foreign currency.
The Company is exposed to floating exchange rate risk on the ground that most bank loans have variable interest rates.