Liquidity risk
Liquidity risk is the risk of the LGU not being able to meet its obligations as they fall due.
The LGU’s approach to managing liquidity risk is to ensure that sufficient liquidity is
available to meet its liabilities when due, without incurring unacceptable losses or risking
damage to the LGU’s reputation.
The LGU ensures that it has sufficient cash on demand to meet expected operating
expenses through the use of cash flow forecasts.
Capital management
The primary objective of managing the LGU’s capital is to ensure that there is sufficient
cash available to support the LGU’s funding requirements, including capital expenditure,
to ensure that the LGU remains financially sound. The LGU monitors capital using a
gearing ratio, which is net debt, divided by total capital, plus net debt. In a capital intensive
industry, a gearing ratio of 54.5% or less can be considered reasonable. Included in net
debt are interest-bearing loans and borrowings, payables, less investments.
Currency risk
The LGU is exposed to foreign-currency risk through the importation of goods and
services, either directly or indirectly, through the award of contracts to local importers. The
LGU manages any material direct exposure to foreign-currency risk by entering into
forward exchange contracts. The LGU manages its indirect exposure by requiring the local
importer to take out a forward exchange contract at the time of procurement, in order to
predetermine the peso value of the contracted goods or services. The LGU is not a direct
party to any outstanding forward exchange contracts at the reporting date. The movement
in the currency was not material to the LGU’s procurement.
Market risk
Market risk is the risk of changes in market prices, such as foreign-exchange rates and
interest rates, affecting the LGU’s income or the value of its financial instrument holdings.
The objective of market risk management is to manage and control market risk exposures
within acceptable parameters, while optimizing the return on the risk.
Note 4. Cash and Cash Equivalents
This account is composed of the following:
2024 2023
Cash on Hand
Cash in Local Treasury ₱ 201,736.33 ₱ 563,948.79
Petty Cash 0.00 0.00
Cash in Banks - Local Currency
Cash in Banks - Local Currency, Current Account 115,219,572.47 121,597,220.29
Total Cash and Cash Equivalents ₱ 115,421,308.80 ₱ 122,161,169.08
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