An article by Chancy, Mead, and Schermann (2002) summarizes six government-wide ratios to measure fiscal distress and
Question:
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?
Business Analysis Valuation Using Financial Statements
ISBN: 978-1111972301
5th edition
Authors: Paul M. Healy