Financial Analysis

Government’s economic condition

• Financial position• Ability and willingness to meet

commitments• Satisfy financial obligations• See table 15-1

Financial Analysis

• Fiscal Capacity• Trend• Liquidity• Solvency• Funding

Fiscal Capacity

• Ability to command resources• Look at demographics• Leadership characteristics• Wealth of citizens• Mix of business vs. homeowners• Fiscal effort – Per capita revenue from gov’t sources

Median family income

Financial Analysis

• Must always be compared to something – Prior years– Other similar governments– To rule of thumb measures• Census – www.census.gov• Economic Analysis – www.bea.doc.gov• Labor Statistics – stats.bis.gov

Operating information

• Surpluses or deficits• Intergovernmental revenue/total operating revenue

– How dependent is the government on others

• Restricted revenue/total revenue – How flexible can the government be in the revenue they get

• Property tax revenue/total – Most governments get the majority of their funds from property tax

• Discretionary expenditures/total expenditures– Addresses the ability to cut expenditures

Trend Analysis

• Surpluses/deficits over the years• Increases in surpluses and deficits• Population trends• Additional businesses • Common Sizing

• Percentage change over years• Percent distribution

Liquidity

• Measures the ability to pay current bills• Current ratio– Current assets

Current liabilities • Quick ratio – Cash + cash equivalents Current Liabilities

• Acceptable levels??

Solvency

• Measures the ability to pay L/T debt• Leverage – L/T Debt (info from Gov’t-wide)

Assets • Coverage – DS Expend

GF + DS Expenditures

Funding

• Property tax per capita• Property tax per $1K of assessed value• Debt per capita• Debt margin• Expenditure per capita• Other revenues/ total revenues