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Chapter 11: Analysis of Financial Statements and Financial Condition

Terms in this set (28)

what does the statement of net position do
provides info about an org's assets, liabilities, and net position,

allows an analyst to reach some conclusions about the entity's liquidity and financial flexibility
what does the RSI contain
pension and OPEB obligations, funding progress
what does the MD&A provide
info about causes for changes in amounts reported
what do liquidity indicators do?
help assess an entity's ability to meet its short term obligations
types of liquidity ratios
quick: (cash+cash equivalents+sterm investments)/current liab.

#days cash on hand: (cash+cash equiv+sterm invest)/[(total expenses-deprec+transfers out)/365]
asset turnover/efficiency indicators..
assess an entity's efficiency in using its resources
efficiency indicators:
days revenue in receivables

property tax collection rate

property tax receivable rate

total asset turnover
days revenue in receivables
net AR/(net revenue from services/365)
property tax collection rate
current year real property taxes collected/current year real property tax levy
property tax receivable rate
real property taxes receivable/real property tax revenues
total asset turnover
unrest.rev, gains, and other support/unrestricted net assets
what is budget solvency?
being able to generate sufficient recurring revenues each year to meet recurring expenses and having sufficiently large reserve of readily available resources to weather economic contractions and emergency expenditure needs
types of budget solvency indicators
budgetary cusion

operating margin
budgetary cusion
available fund balance/(total revenues+recurring transfers in)
operating margin
net change in fund balances/(total revenues+recurring transfers in)
reasonable level of budgetary cusion?
5-10%
what is the goal of operating margin
small positive operating margin
debt burden
net outstanding tax-supported debt/population
what does debt burden do
relate outstanding lterm debt to a base that measures the ability to pay the debt and that can be tracked over time and compared with other governments
debt service burden
total tax supported debt service/(total rev+transfers in)
what does debt service burden do
shows flexibility of the portion of a gov's revs that is consumed by the annual payment on principal and interes on lterm debt and interest on sterm debt (smaller ratio is bad)
debt principal payback
expected debt principal payback in next 5-10 years/net outstanding tax supported debt
what does debt principal payback do
shows the rate at which the principal on debt is repaid. faster rate of payback is good
capital structure refers to:
extent to which an activity's assets are financed through the use of debt
debt to equity
lterm debt/net assets or net unrestricted assets

if debt increases, the entity's financial flexibility decreases
debt service coverage
(excess rev over exp)+dep+int exp / (principal payment+int exp)
times interest earned
(excess rev over exp)+int exp / int exp
coverage analysis focuses on
the entity's ability to repay the debt (greater number better)
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