The complexity and uniqueness of the federal government makes it difficult to conduct a meaningful analysis of its financial condition. However, conducting a financial statement analysis does provide a better understanding of the federal government. To assist in the financial statement analysis, use Illustrations 17–2 and 17–3 along with the following excerpts from the 2010

Financial Report of the United States Government.

Required

a. To provide an indication of the government’s financial capability answer the following:

(1) What percentage of total revenues comes from individual income taxes and withholdings?

(2) What is the debt load as calculated by the ratio of principal and interest payments on debt held by the public to net costs?

b. To provide an indication of the government’s financial performance, answer the following:

(1) What is inter-period equity, as calculated by the ratio of revenue to net costs?

c. To provide an indication of the government’s financial position answer the following:

(1) What is the ratio of non-earmarked funds to revenue?

(2) What is the quick ratio (use known current liabilities in the calculation)?

(3) What is the capital asset condition as calculated by the ratio of accumulated depreciation to the cost of depreciable capital assets?

d. Based on the ratios you have calculated, how would you assess the financial condition of the federal government for FY2010?

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UNITED STATES GOVERNMENT Statements of Changes in Cash Balance from Unified Budget and Other Activities For the Years Ended September 30 (In billions of dollars) 2009 (Restated) 2010 Unified budget deficit (1,294.1) (1,417.1) Adjustments for noncash outlays included in the budget: Interest accrued by Treasury on debt held by the public TARP year-end downward re-estimate TARP Subsidy expensev(income) Other Federal entity subsidy expense(income) 171.9 206.8 (86.4) (24.2) 110.0 41.4 (44.5) (9.4) Subtotal 86.8 278.8 Items affecting the cash balance not included in the Budget: Net Transactions from financing activity: Borrowings from the public Repayment of debt held bythe public Agency securities 8,931.0 (7,185.6) 8,525.5 (7,054.5) 0.7 Subtotal 1,745.4 1,471.7 Transactions from monetary and other activity: Interest paid by Treasury on debt held by the public Net TARP direct loans and equity investments activity Net GSE-mortgage backed securities activity Net loan receivable activity Allocations of special drawing rights (201.2) (170.7) (291.0) (170.0) (93.0) 111.8 9.1 (160.3) (1.0) 48.3 12.6 Other 38.0 (229.0) (638.4) Subtotal Cash and other monetary assets: (Decrease)vincrease in cash and other monetary assets Balance, beginning of period (31.3) 35.4 393.2 424.5 Balance, end of period 428.6 393.2