The complexity and uniqueness of the federal government make 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 2019 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 service as calculated by the ratio of principal and interest payments on debt held by the public to total revenue?

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

(1) What is interperiod 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 nondedicated collections funds to total 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 FY 2019?  

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United States Government Statements of Changes in Cash Balance from Budget and Other Activities for the Years Ended September 30, 2019, and 2018 (In billions of dollars) Cash flow from budget activities Total budget receipts Total budget outlays Budget deficit Adjustments for non-cash outlays included in the budget Non-cash flow amounts in the budget related to federal debt securities Accrued interest Net amortization Other Subtotal-adjustments for non-cash flow amounts in the budget related to federal debt securities Non-cash flow amounts in the budget related to loan financing account activity Interest revenue on uninvested funds Interest expense on entity borrowings Entities' downward reestimates/negative subsidy payments Entities' subsidy expense/upward reestimates Subtotal-adjustments for non-cash flow amounts in the budget related to loan financing account activity Total of adjustments for non-cash outlays included in the budget 2019 3,462.2 (4,446.6) (984.4) 305.5 65.7 (33.3) 337.9 7.1 (43.2) (22.8) 47.7 (11.2) 326.7 2018 3,328.7 (4,107.7) (779.0) 268.5 41.9 1.1 311.5 7.9 (42.1) (37.3) 35.8 (35.7) 275.8 continued