Draft a short analysis and with a preliminary identification of the most important problems and a discussion of possible causes and solutions.

Compute the ratios listed in Table A using the balance sheet and income statements (Tables 1 and 2) and the production data (Table 3).

Please fill the below worksheet.

TABLE A

few things to keep in mind during calculations

(1)Be careful about the negative sign since in accounting +/- signs are used for showing whether the money is coming in or going out. In formulas, that ask you to subtract something-- you'll get a wrong answer if you end up using two negative signs. For example, money in uncollectable accounts is expressed in negative, that does not mean you will subtract it again when calculating average collection period. Two negative signs will make it positive. Thus, you'll end up adding uncollectibles to receivables. A similar negative sign problem you might see in Time Interest Earned Ratio, which should be a positive number.

(2)In average collection period in days (water and valor) -multiply 365 with the entire ratio, i.e., keep it in the numerator. See this link to understand it clearly https://www.investopedia.com/terms/a/average_collection_period.asp. If you do it right, for 1974,you should get average collection period of around 86 days for water and 398 for valor. Remember, uncollectable accounts are already expressed with a negative sign.

(3) Total Asset Turnover is listed as a liquidity ratio in the table, but it should be under efficiency ratios

PANAMA WATER AUTHORITY WORKSHEET II. SOLVENCY a. Long Term Debe to Capitalization Long rerm debt/long term debt + patrimony b. Total Debc/Assets c. Ifmes Interest Earaed Ratio Net Operaring Revenues before interest/interest charges III. PROFITABILIDI a. Net Profit to Toral Revenues b. Net profit/Pateimony c. Net Prof1t/Assets IV. EFEICIENCY a. Volume of Water Produced/Assers b. Volume of Watar Sold/Assets c. Operating Ratio Gross operating expenses/ operating revenues IV. EFFICIENCY The Panama Water Authority, December 31, 1974 General Balance Sheet (thousands of Balboas) 1 1 One Baiboa = One US Dollar 2 Each year a reserve is kept for uncollectable accounts. These reserves are negative numbers. To compute a net receivable figure suburact the reserves from the accounts receivable. 3 The water authority collects and keeps a portion of the property tax to subsidize water prices. 4 What the water authority called Patrimony is normally called Contributions in a publicly owned utility. This is equivalent to equity or proprietary capital in an investor owned utility. Table 1 (continued) Table 2 The Panamanian Water Authority CONSOLIDATED INCOME STATEMENT (Thousands of Balboas) Table 3 The Panamanian Water Authority WATER PRODUCTION DATA