An article by Chancy, Mead, and Schermann (2002) summarizes six government-wide ratios to measure fiscal distress and related financial risk factors of municipalities. One ratio provides an overall measure of financial position for the government. Two ratios provide measures of financial performance. A fourth ratio provides a measure of liquidity. Two final ratios provide measures of solvency. These ratios in comparison to the ratios measured for similar governments, combined with other useful information, provide a starting point for evaluating the overall financial condition of a governmental entity. The definitions and measurements of these ratios and factors are listed in the following table.

 

Calculate the risk ratios for New York State, and answer   

a. What conclusions concerning the city’s financial position can be drawn from these ratios? 

b. What conclusions concerning the city’s liquidity can be drawn from these ratios? 

c. What conclusions concerning the city’s financial performance can be drawn from these ratios? 

d. What conclusions concerning the city’s solvency can be drawn from these ratios?

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Financial Ratios Measures of: Financial Position Calculation: Unrestricted Net Assets Expenses Change in Net Assets Total Net Assets General Revenues + Transfers Expenses Cash + Current Investments+ Receivables Current Liabilities Financial Performance Liquidity Long-term Debt Assets Solvency: Change in Net Assets + Interest Expense Interest Expense Financial Ratios Measures of: Financial Position Calculation: Unrestricted Net Assets Expenses Change in Net Assets Total Net Assets General Revenues + Transfers Expenses Cash + Current Investments+ Receivables Current Liabilities Financial Performance Liquidity Long-term Debt Assets Solvency: Change in Net Assets + Interest Expense Interest Expense

Answer rating: 100% (QA)

Ans 1financial position unrestricted net assets expenses Unrestricted net assets is a type of operat... View the full answer