GREEN DRAGON WOOD PRODUCTS, INC. - FORM 10-Q - XML - IDEA: XBRL DOCUMENT - February 21, 2012

NOTE – 13                      CONCENTRATIONS OF RISK

The Company is exposed to the following concentrations of risk:

(a)             Major customers

For the three and nine months ended December 31, 2011 and 2010, customers accounting for 10% or more of the Company's revenues and their outstanding accounts receivable balances at period-end date, are presented as follows:

(b)             Major vendors

For the three months ended December 31, 2011, vendors accounting for 10% or more of the Company’s purchases and their outstanding accounts payable balances at period-end date, are presented as follows:

For the nine months ended December 31, 2011, one vendor represented more than 10% of the Company’s purchases. This vendor accounted for 26% of purchases amounting to $3,001,885 with $0 of accounts payable as of December 31, 2011.

For the three months ended December 31, 2010, one vendor represented more than 10% of the Company’s purchases. This vendor accounted for 23% of purchases amounting to $1,187,984 with $0 of accounts payable as of December 31, 2010.

For the nine months ended December 31, 2010, one vendor represented more than 10% of the Company’s purchases. This vendor accounted for 21% of purchases amounting to $2,969,572 with $0 of accounts payable as of December 31, 2010.

(c)             Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.

(d)             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.

The Company’s interest-rate risk arises from revolving lines of credit and other borrowings. Borrowings issued at variable rates expose the Company to cash flow interest rate risk. The Company manages interest rate risk by varying the issuance and maturity dates of its variable rate debt, limiting the amount of variable rate debt, and continually monitoring the effects of market changes in interest rates. As of December 31, 2011, most of the Company’s borrowings were at variable rates. The interest rates and terms of repayment of the borrowings are disclosed in Notes 7 and 8.

(e)             Exchange rate risk

The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on the exchange rate of HK$ converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.