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Panama Water Authority Exercise

You have been called in as a consultant to the new water authority director. She has told you that the Panamanian government embarked recently on a campaign to improve living conditions in rural areas. As part of the campaign, the water authority began a program to deliver more potable water to people in rural areas. She has told you that in low-income countries, the most frequent cause of death is gastro-intestinal disease. There seems to be a correlation between reduction of gastrointestinal disease and the extension of potable water services to a large proportion of the low-income populations. This knowledge has in part served as the rationale for extension of potable water services to rural areas. The new director informed you that the service expansion campaign she inherited has certain difficulties. In order to orient you, she has given you balance sheet and income statements (Tables 1 and 2) and the production data (Table 3). She would like you to do an analysis and write a 2-3 page memo with a preliminary identification of the most important problems and a discussion of possible causes and solutions. Compute the ratios listed in Table A and include that as an appendix table in your memo. In the first few paragraphs of your memo present a general discussion along with the identification of the key issues and possible solutions to the problems. Subsequently, discuss the specific areas like liquidity, solvency, profitability and efficiency, and describe the trends and what they imply. Additional Instructions: o There are two additional files on the Blackboard that accompany this assignment. Please download and go through them before working on the assignment. (1) Panama Worksheet in MS-Excel is the digitized version of the tables in pages 2-6. The excel files also provide hints for calculating the key ratios. (2) Panama Water Authority Supplement A is a supplement to the case study that outlines the basic concepts for financial analysis in public enterprises

Panama Water Authority

You have been called in as a consultant to the new water authority director. She has told you that the Panamanian government embarked recently on a campaign to improve living conditions in rural areas. As part of the campaign, the water authority began a program to deliver more potable water to people in rural areas. She has told you that in low-income countries, the most frequent cause of death is gastro-intestinal disease. There seems to be a correlation between reduction of gastrointestinal disease and the extension of potable water services to a large proportion of the low-income populations. This knowledge has in part served as the rationale for extension of potable water services to rural areas.

The new director informed you that the service expansion campaign she inherited has certain difficulties. In order to orient you, she has given you balance sheet and income statements (Tables 1 and 2) and the production data (Table 3). She would like you to do an analysis and write a 2-3 page memo with a preliminary identification of the most important problems and a discussion of possible causes and solutions.

Compute the ratios listed in Table A and include that as an appendix table in your memo. In the first few paragraphs of your memo present a general discussion along with the identification of the key issues and possible solutions to the problems. Subsequently, discuss the specific areas like liquidity, solvency, profitability and efficiency, and describe the trends and what they imply.

Additional Instructions: There are two additional files on the Blackboard that accompany this assignment. Please download and go through them before working on the assignment.

(1) Panama Worksheet in MS-Excel is the digitized version of the tables in pages 2-6. The excel files also provide hints for calculating the key ratios.

(2) Panama Water Authority Supplement A is a supplement to the case study that outlines the basic concepts for financial analysis in public enterprises.

Your memo should follow the memo format that we have discussed earlier. Use appropriate section breaks, use single-spaced Times New Roman (12-point) Font, and include an executive summary.

P Q . : Table A (A digital version of this table is available on the Blackboard, please do all your calculations in the spreadsheet, and include the final table as an appendix in your memo) PAMAMA WATER AUTHORITY WORKSHEET PLEASE NOTE THE REVERSE TIME ORDER, 1974, 1973, 1972 1974 1973 1972 COMENTS 1 YESURE AND MATIO I. LOODITY 4. Current CA/CL b. Quick Ratio CA - lover bories/CL C. average Collection Perled (ees) See water receivables/ saies X 365 X d. Average Collectiso Per led (Valar? See valor. receivablea/sales x 365 e. Total Aseta Tu dove . Gross operating reveaues! total assets II. SOLVENCY a. Long Term Debe to Capitalisaties Long tam debe/ Long tom debt + patricia 2. Total Debt/Aanets e. Ties Caterege Essaed Recto Nae Operating Revenues before Loterut/locer est charges / ELE. PEORETA Het Press to Total Revenues Bee Procit/Patrimony c. Yet Proest/Assets IV. DE CIENCY Toliss a WAEAE Product/Assets b. Talupe oc Water Sold/Assets C. Operating Ratio Boss operating expenses/ 3088 operating ceremos d. Operation and Malance Expenses as percent of operating expenses dalolatricion Expuses as a percent! of operacing exposed Pape 2 1 Table 1 The Panama Water Authority, December 31, 1974 General Balance Sheet thousands of Balboas) ASSETS AND OTHER DEBITS. 1974 1973 1972 A. FIXED ASSETS (UTILITY PLANT AND OTHER PROPERTY AND INVESTMENTS) PRM ar O u E 7 Q : Table 1 The Panama Water Authority, December 31, 1974 Central Balance Sheed thousands of Balboas)! 1972 45,952 (16010 29.906 16,928 47.182 ASSETS AND OTHER DEBITS 1974 1973 A. FIXED ASSETS (UTILITY PLANT AND OTHER PROPERTY AND INVESTMENTS) Depreciable Fixed Assets 66,710 58.380 Depreciation Reserve (19.000 (17.207 Net Pled Assets 67.708 40,373 Cunetruction in Process 12134 26,633 Land 284 -72 TOTAL STXED ASSETS 30.926 57 581 B. CLRRENT ASSETS AND ACCRUED ASSETS Cash 2227 2.356 Accounts Receivable for Water 2,470 2,299 Provision for Uncollectable Water Account? (1,021) (HR) Accounts Receivable Valorization Tay 2.563 2.129 Provision for Uncollectable Valorization Accounts (214) (193) Inventories 1,234 987 Reserve for Inventory Austents (110) (49) ) Other 973 9 ROL 8.99 TOTAL CURRENT ASSETS 8.109 7475 C. DEFERRED DEETS TOTAL DEFERRED DEBITS 1,261 484 2,561 2,659 (534) 1.303 (172) 543 (12) 410 2143 1 535 TOTAL ASSETS AND OTHER DEBITS 90,296 79,340 54,981 1973 1972 LIABILITIES AND OTHER CREDITS 1974 A. PATRIMONY CONTRIBUTIONS Initial Grant from the Government 7,740 Support from the Governant 29,05 Accrued Results of Operations 8,905 Other Contributors 562 TOTAL PATRIMONY (CONTRIBUTIONS) 40,265 7,740 17.100 8.623 7,740 10,000 8,0344 526 28,300 3 39,772 Unc Babo One US Dollar 2 Esch year reserve is kept for collectie scot These reserves are negative tubers Te campane Trolvable agur siteract the reserves froet the cos receivable The water withority collecus end ups a portion of the property tax to subsidize waar per 4 Whebe vier wuchecity called Purchase it tomally called Carribem a publicly owned alley. This is suivants quity na proprietary capitian mer owned olio Page 3 Table 1 (continued B. LONG TERM DENT Long Term Loans and lands TOTAL LONC TERM DEBT 49.595 40.505 4.965 31.965 21.46 23,346 3,810 3,510 2,763 C CURZEN AND ACCRUED LIABILITIES Contracts and Notes Payable Accounts Payable Panama Canal Company National Government Autonomous Agencies Other Payables Including Income Taxes and Accued Exp TOTAL LLADILITIES AND OTHER CREDITS 774 28 1.26 JAZ! HU 143 US 78 2.321 1 9.526 6.703 52 TOTAL LIABILITIES AND OTHER CREDIIS 90.296 25.540 54.81 LI Q . : Page 4 Table 2 The I'anamanian Water Authority CONSOLIDATED INCOME STATEMENT (Thousands of Dalboas) 1944 1977 1972 OPERATING REVENUES Net Water Sales Valoration Income Other 6,154 2,1.52 6,400 2.174 6,210 2,119 333 321 8,75 8.955 8.1.2 3.257 1445 4,651 1.780 1.197 7,628 1,165 # | 4001 1517 525 6,423 2,471 GROSS OPERATING REVENUE OPERATING EXPENSES Maintenance and Operation General Administration Depreciation TOTAL OPERATING EXPENSES NET OPERATING REVENUES DEPORE INTEREST CHARGED OTHER INCOME Less: INTEREST AND COMMISSIONS NET INCOME BEFORE ADJUSTMENTS Less: ADJUSTMENTS NET INCOME MINUS ADJUSTMENTS (also called Net Profit 5,555 3,106 1.107 0 255 1,616 (118) 0 598 2.508 194) 2,414 61 1.564 O cereas sented Gram direct operating activite but have been added in the presteg RK BE 1 4 Table 3 The Panamanian Water Authority WATER PRODUCTION DATA 1975 1972 WATER SOLD AS A PERCENTAGE OF = Q Oder trees net generated from direciperating times but have been isstood in the Operating Revenues SECTOR Piges Table 3 The Panamanian Water Authority WATER PRODUCTION DATA 1972 79% 70% 545 72% 934 71% 624 77% 81% 674 % 634. 76% WATER SOLD AS A PERCINTAGE OF WATER PRODUCED AND DELIVERED TO THE DISTRIBUTION SYSTEM Panama City Colon City Interior Provinces Total VOLUME OF WATER TRODUCED AND PURCHASED! (millions of gallons! VOLUME OF WATER SOLD (millions of allons AVERAGE INCOME PER THOUSAND GALLONS 24,105 22,029 19,801 17,500 17,085 15,112 .35 .37 41 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 furmulus, 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 aisting 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 ellicier 1 Some war in parchand from Canals facilities and se le Par Cry 6 catcuations mine spreadsnee, and mciudc mne una table as an appendix in your memo PANAMA WATER AUTHORITY WORKSHEET PLEASE NOTE THE REVERSE TIME ORDER, 1974, 1973, 1972 MEASURE AND RATIO 1974 1973 1972 COMMENTS I. LIQUIDITY a. Current CA/CL . Quick Racio CA. tavancorieg/CL c. Average Collection Period (Water) Net water receivables/ salles x 365 d. Average Collection Period (Valor.) Net valor. receivables/sales X 365 e. Tour Assets Turnover Gross operating revenues/ Coca assets II. SOLVENCY Long Term Debt co Capitalizacion Long cer debe/long cera debt + patrimony Total Debc/Assets Times Lacerest Earned Ratio Net Operating Revenues before iaceresc/lacerese charges IIL. PROFITABILITI 4. Net Profit to Tocal Revenues b. Net Prof1c/Paceimony c. Net Profic/Assets IV. EFFICIENCY Volume of Water Produced/Assets a. b. Volume of Water Sold/ Assecs Operating Ratio Gross operating expenses na www Net Profit/Assets IV. EFFICIENCY Volume of Water Produced/Assets Volume of Water Sold/ Assets Operating Ratio Gross operating expenses/ operating revenues d. Operation and Maintenance Expenses 33 & percent of operating expenses Adrioistra cioo Expenses as a percent of operacing expenses Table 1 The Panama Water Authority, December 31, 1974 General Balance Sheet (thousands of Balboas)? 1972 45,952 (16.046) 29,906 16,928 348 47,182 ASSETS AND OTHER DEBITS 1974 1973 A. FIXED ASSETS (UTILITY PLANT AND OTHER PROPERTY AND INVESTMENTS) Depreciable Fixed Assets 86,710 58,380 Depreciation Reserve (19,002) (17,807) Net Fixed Assets 67,708 40,573 Construction in Process 12,834 26,635 Land 384 373 TOTAL FIXED ASSETS 80,926 67,581 B. CURRENT ASSETS AND ACCRUED ASSETS Cash 2,227 2,356 Accounts Receivable for Water 2,470 2,293 Provision for Uncollectable Water Accounts2 (1,021) (838) Accounts Receivable Valorization Tax 2,563 2,129 Provision for Uncollectable Valorization Accounts (218) (193) Inventories 1,234 887 Reserve for Invenbory Adjustments (119) (48) Other 973 889 TOTAL CURRENT ASSETS 8.109 7475 C. DEFERRED DEBITS TOTAL DEFERRED DEBITS 1,261 484 2,961 2,659 (534) 1,308 (172) 548 (17) 2.163 536 TOTAL ASSETS AND OTHER DEBITS 90,296 75,540 54,881 1973 1972 LIABILITIES AND OTHER CREDITS 1974 A. PATRIMONY (CONTRIBUTIONS)4 Initial Grant from the Government 7,740 Support from the Government 23,051 Accrued Results of Operations 8,905 Other Contributions 569 TOTAL PATRIMONY (CONTRIBUTIONS) 40,265 7,740 17,100 8,423 529 33,792 7,740 10.000 8,034 526 26,300 One Balbos - One US Dollar 2 Each year a reserve is kept for uncollectable accounts. These reserves are negative numbers. To compute net receivable figure subtract the reserves from the accounts receivable. The water authority collects and keeps a portion of the property tax to subsidize water prices. 1 One Balbon - One US Dollar 2 Each year a reserve is kept for uncollectable accounts. These reserves are negative numbers. To compute a ner receivable figure subtract the reserves from the accounts receivable. 3 The water authority collects and keeps a portion of the property tax to subsidizo 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) B. LONG TERM DEBT Long Term Loans and Bonds TOTAL LONG TERM DEBT 40.505 40,505 34.965 34,965 23.346 23,346 3,840 3,510 2,763 C. CURRENT AND ACCRUED LIABILITIES Contracts and Notes Payable Accounts Payable Panama Canal Company National Government Autonomous Agencies Other Payables Including Income Taxes and Accrued Expenses TOTAL LIABILITIES AND OTHER CREDITS 809 143 668 78 774 28 1,206 3.678 2.321 1.726 9,526 6,783 5,235 TYT AT TARTY CO ANI OD ONITS 02 99 Table 1 (continued B. LONG TERM DEBT Long Term Loans and Bonds TOTAL LONG TERM DEBT 40,505 40,505 34 965 34,965 23,346 23,346 3,840 3,510 2,763 774 C. CURRENT AND ACCRUED LIABILITIES Contracts and Notes Payable Accounts Payable Panama Canal Company National Government Autonomous Agencies Other Payables Induding Income Taxes and Accrued Expenses TOTAL LIABILITIES AND OTHER CREDITS 809 143 28 668 78 1,206 3,678 2.321 1.726 9,526 6,783 5,235 TOTAL LIABILITIES AND OTHER CREDITS 90,296 75,540 54,881 Table 2 The Panamanian Water Authority CONSOLIDATED INCOME STATEMENT (Thousands of Balboas) 1974 1978 1972 OPERATING REVENUES Net Water Sales Valorization Income Otheri 6,154 2,152 490 6,400 2,174 321 6,210 2,119 333 GROSS OPERATING REVENUE 8,796 8,895 8,662 4,651 1,780 1197 7,628 1,168 4,031 1,517 875 6,423 2,471 3.257 1,445 853 5,555 3,106 OPERATING EXPENSES Maintenance and Operation General Administration Depreciation TOTAL OPERATING EXPENSES NET OPERATING REVENUES BEFORE INTEREST CHARGED OTHER INCOME Less: INTEREST AND COMMISSIONS NET INCOME BEFORE ADJUSTMENTS Less: ADJUSTMENTS NET INCOME MINUS ADJUSTMENTS (also called Net Profit) 0 0 0 1,107 785 598 61 1,686 2,508 (118) (94) 61 1,568 2,414 Table 3 The Panamanian Water Authority WATER PRODUCTION DATA 1974 1973 1972 WATER SOLD AS A PERCENTAGE OF WATER PRODUCED AND DELIVERED TO THE DISTRIBUTION SYSTEM Panama City Colon City Interior Provinces Total 79% 70% 54% 72% 83% 71% 62% 77% 81% 67% 63% 76% VOLUME OF WATER PRODUCED AND PURCHASED (millions of gallons) 24,108 22,029 19,807 VOLUME OF WATER SOLD (millions of gallons) 17,500 17,085 15,112 AVERAGE INCOME PER THOUSAND GALLONS .35 ..37 .41 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 someti -- you'll get a wrong answer if you end up using two negative signs. For example, money uncollectable accounts is expressed in negative, that does not mean you will subtract it ag when calculating average collection period. Two negative signs will make it positive. Th you'll end up adding uncollectibles to receivables. A similar negative sign problem you m 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 ra 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 ef Some water is purchased from Canal Zone facilities and used in Panama Cly. P Q . : Table A (A digital version of this table is available on the Blackboard, please do all your calculations in the spreadsheet, and include the final table as an appendix in your memo) PAMAMA WATER AUTHORITY WORKSHEET PLEASE NOTE THE REVERSE TIME ORDER, 1974, 1973, 1972 1974 1973 1972 COMENTS 1 YESURE AND MATIO I. LOODITY 4. Current CA/CL b. Quick Ratio CA - lover bories/CL C. average Collection Perled (ees) See water receivables/ saies X 365 X d. Average Collectiso Per led (Valar? See valor. receivablea/sales x 365 e. Total Aseta Tu dove . Gross operating reveaues! total assets II. SOLVENCY a. Long Term Debe to Capitalisaties Long tam debe/ Long tom debt + patricia 2. Total Debt/Aanets e. Ties Caterege Essaed Recto Nae Operating Revenues before Loterut/locer est charges / ELE. PEORETA Het Press to Total Revenues Bee Procit/Patrimony c. Yet Proest/Assets IV. DE CIENCY Toliss a WAEAE Product/Assets b. Talupe oc Water Sold/Assets C. Operating Ratio Boss operating expenses/ 3088 operating ceremos d. Operation and Malance Expenses as percent of operating expenses dalolatricion Expuses as a percent! of operacing exposed Pape 2 1 Table 1 The Panama Water Authority, December 31, 1974 General Balance Sheet thousands of Balboas) ASSETS AND OTHER DEBITS. 1974 1973 1972 A. FIXED ASSETS (UTILITY PLANT AND OTHER PROPERTY AND INVESTMENTS) PRM ar O u E 7 Q : Table 1 The Panama Water Authority, December 31, 1974 Central Balance Sheed thousands of Balboas)! 1972 45,952 (16010 29.906 16,928 47.182 ASSETS AND OTHER DEBITS 1974 1973 A. FIXED ASSETS (UTILITY PLANT AND OTHER PROPERTY AND INVESTMENTS) Depreciable Fixed Assets 66,710 58.380 Depreciation Reserve (19.000 (17.207 Net Pled Assets 67.708 40,373 Cunetruction in Process 12134 26,633 Land 284 -72 TOTAL STXED ASSETS 30.926 57 581 B. CLRRENT ASSETS AND ACCRUED ASSETS Cash 2227 2.356 Accounts Receivable for Water 2,470 2,299 Provision for Uncollectable Water Account? (1,021) (HR) Accounts Receivable Valorization Tay 2.563 2.129 Provision for Uncollectable Valorization Accounts (214) (193) Inventories 1,234 987 Reserve for Inventory Austents (110) (49) ) Other 973 9 ROL 8.99 TOTAL CURRENT ASSETS 8.109 7475 C. DEFERRED DEETS TOTAL DEFERRED DEBITS 1,261 484 2,561 2,659 (534) 1.303 (172) 543 (12) 410 2143 1 535 TOTAL ASSETS AND OTHER DEBITS 90,296 79,340 54,981 1973 1972 LIABILITIES AND OTHER CREDITS 1974 A. PATRIMONY CONTRIBUTIONS Initial Grant from the Government 7,740 Support from the Governant 29,05 Accrued Results of Operations 8,905 Other Contributors 562 TOTAL PATRIMONY (CONTRIBUTIONS) 40,265 7,740 17.100 8.623 7,740 10,000 8,0344 526 28,300 3 39,772 Unc Babo One US Dollar 2 Esch year reserve is kept for collectie scot These reserves are negative tubers Te campane Trolvable agur siteract the reserves froet the cos receivable The water withority collecus end ups a portion of the property tax to subsidize waar per 4 Whebe vier wuchecity called Purchase it tomally called Carribem a publicly owned alley. This is suivants quity na proprietary capitian mer owned olio Page 3 Table 1 (continued B. LONG TERM DENT Long Term Loans and lands TOTAL LONC TERM DEBT 49.595 40.505 4.965 31.965 21.46 23,346 3,810 3,510 2,763 C CURZEN AND ACCRUED LIABILITIES Contracts and Notes Payable Accounts Payable Panama Canal Company National Government Autonomous Agencies Other Payables Including Income Taxes and Accued Exp TOTAL LLADILITIES AND OTHER CREDITS 774 28 1.26 JAZ! HU 143 US 78 2.321 1 9.526 6.703 52 TOTAL LIABILITIES AND OTHER CREDIIS 90.296 25.540 54.81 LI Q . : Page 4 Table 2 The I'anamanian Water Authority CONSOLIDATED INCOME STATEMENT (Thousands of Dalboas) 1944 1977 1972 OPERATING REVENUES Net Water Sales Valoration Income Other 6,154 2,1.52 6,400 2.174 6,210 2,119 333 321 8,75 8.955 8.1.2 3.257 1445 4,651 1.780 1.197 7,628 1,165 # | 4001 1517 525 6,423 2,471 GROSS OPERATING REVENUE OPERATING EXPENSES Maintenance and Operation General Administration Depreciation TOTAL OPERATING EXPENSES NET OPERATING REVENUES DEPORE INTEREST CHARGED OTHER INCOME Less: INTEREST AND COMMISSIONS NET INCOME BEFORE ADJUSTMENTS Less: ADJUSTMENTS NET INCOME MINUS ADJUSTMENTS (also called Net Profit 5,555 3,106 1.107 0 255 1,616 (118) 0 598 2.508 194) 2,414 61 1.564 O cereas sented Gram direct operating activite but have been added in the presteg RK BE 1 4 Table 3 The Panamanian Water Authority WATER PRODUCTION DATA 1975 1972 WATER SOLD AS A PERCENTAGE OF = Q Oder trees net generated from direciperating times but have been isstood in the Operating Revenues SECTOR Piges Table 3 The Panamanian Water Authority WATER PRODUCTION DATA 1972 79% 70% 545 72% 934 71% 624 77% 81% 674 % 634. 76% WATER SOLD AS A PERCINTAGE OF WATER PRODUCED AND DELIVERED TO THE DISTRIBUTION SYSTEM Panama City Colon City Interior Provinces Total VOLUME OF WATER TRODUCED AND PURCHASED! (millions of gallons! VOLUME OF WATER SOLD (millions of allons AVERAGE INCOME PER THOUSAND GALLONS 24,105 22,029 19,801 17,500 17,085 15,112 .35 .37 41 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 furmulus, 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 aisting 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 ellicier 1 Some war in parchand from Canals facilities and se le Par Cry 6 catcuations mine spreadsnee, and mciudc mne una table as an appendix in your memo PANAMA WATER AUTHORITY WORKSHEET PLEASE NOTE THE REVERSE TIME ORDER, 1974, 1973, 1972 MEASURE AND RATIO 1974 1973 1972 COMMENTS I. LIQUIDITY a. Current CA/CL . Quick Racio CA. tavancorieg/CL c. Average Collection Period (Water) Net water receivables/ salles x 365 d. Average Collection Period (Valor.) Net valor. receivables/sales X 365 e. Tour Assets Turnover Gross operating revenues/ Coca assets II. SOLVENCY Long Term Debt co Capitalizacion Long cer debe/long cera debt + patrimony Total Debc/Assets Times Lacerest Earned Ratio Net Operating Revenues before iaceresc/lacerese charges IIL. PROFITABILITI 4. Net Profit to Tocal Revenues b. Net Prof1c/Paceimony c. Net Profic/Assets IV. EFFICIENCY Volume of Water Produced/Assets a. b. Volume of Water Sold/ Assecs Operating Ratio Gross operating expenses na www Net Profit/Assets IV. EFFICIENCY Volume of Water Produced/Assets Volume of Water Sold/ Assets Operating Ratio Gross operating expenses/ operating revenues d. Operation and Maintenance Expenses 33 & percent of operating expenses Adrioistra cioo Expenses as a percent of operacing expenses Table 1 The Panama Water Authority, December 31, 1974 General Balance Sheet (thousands of Balboas)? 1972 45,952 (16.046) 29,906 16,928 348 47,182 ASSETS AND OTHER DEBITS 1974 1973 A. FIXED ASSETS (UTILITY PLANT AND OTHER PROPERTY AND INVESTMENTS) Depreciable Fixed Assets 86,710 58,380 Depreciation Reserve (19,002) (17,807) Net Fixed Assets 67,708 40,573 Construction in Process 12,834 26,635 Land 384 373 TOTAL FIXED ASSETS 80,926 67,581 B. CURRENT ASSETS AND ACCRUED ASSETS Cash 2,227 2,356 Accounts Receivable for Water 2,470 2,293 Provision for Uncollectable Water Accounts2 (1,021) (838) Accounts Receivable Valorization Tax 2,563 2,129 Provision for Uncollectable Valorization Accounts (218) (193) Inventories 1,234 887 Reserve for Invenbory Adjustments (119) (48) Other 973 889 TOTAL CURRENT ASSETS 8.109 7475 C. DEFERRED DEBITS TOTAL DEFERRED DEBITS 1,261 484 2,961 2,659 (534) 1,308 (172) 548 (17) 2.163 536 TOTAL ASSETS AND OTHER DEBITS 90,296 75,540 54,881 1973 1972 LIABILITIES AND OTHER CREDITS 1974 A. PATRIMONY (CONTRIBUTIONS)4 Initial Grant from the Government 7,740 Support from the Government 23,051 Accrued Results of Operations 8,905 Other Contributions 569 TOTAL PATRIMONY (CONTRIBUTIONS) 40,265 7,740 17,100 8,423 529 33,792 7,740 10.000 8,034 526 26,300 One Balbos - One US Dollar 2 Each year a reserve is kept for uncollectable accounts. These reserves are negative numbers. To compute net receivable figure subtract the reserves from the accounts receivable. The water authority collects and keeps a portion of the property tax to subsidize water prices. 1 One Balbon - One US Dollar 2 Each year a reserve is kept for uncollectable accounts. These reserves are negative numbers. To compute a ner receivable figure subtract the reserves from the accounts receivable. 3 The water authority collects and keeps a portion of the property tax to subsidizo 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) B. LONG TERM DEBT Long Term Loans and Bonds TOTAL LONG TERM DEBT 40.505 40,505 34.965 34,965 23.346 23,346 3,840 3,510 2,763 C. CURRENT AND ACCRUED LIABILITIES Contracts and Notes Payable Accounts Payable Panama Canal Company National Government Autonomous Agencies Other Payables Including Income Taxes and Accrued Expenses TOTAL LIABILITIES AND OTHER CREDITS 809 143 668 78 774 28 1,206 3.678 2.321 1.726 9,526 6,783 5,235 TYT AT TARTY CO ANI OD ONITS 02 99 Table 1 (continued B. LONG TERM DEBT Long Term Loans and Bonds TOTAL LONG TERM DEBT 40,505 40,505 34 965 34,965 23,346 23,346 3,840 3,510 2,763 774 C. CURRENT AND ACCRUED LIABILITIES Contracts and Notes Payable Accounts Payable Panama Canal Company National Government Autonomous Agencies Other Payables Induding Income Taxes and Accrued Expenses TOTAL LIABILITIES AND OTHER CREDITS 809 143 28 668 78 1,206 3,678 2.321 1.726 9,526 6,783 5,235 TOTAL LIABILITIES AND OTHER CREDITS 90,296 75,540 54,881 Table 2 The Panamanian Water Authority CONSOLIDATED INCOME STATEMENT (Thousands of Balboas) 1974 1978 1972 OPERATING REVENUES Net Water Sales Valorization Income Otheri 6,154 2,152 490 6,400 2,174 321 6,210 2,119 333 GROSS OPERATING REVENUE 8,796 8,895 8,662 4,651 1,780 1197 7,628 1,168 4,031 1,517 875 6,423 2,471 3.257 1,445 853 5,555 3,106 OPERATING EXPENSES Maintenance and Operation General Administration Depreciation TOTAL OPERATING EXPENSES NET OPERATING REVENUES BEFORE INTEREST CHARGED OTHER INCOME Less: INTEREST AND COMMISSIONS NET INCOME BEFORE ADJUSTMENTS Less: ADJUSTMENTS NET INCOME MINUS ADJUSTMENTS (also called Net Profit) 0 0 0 1,107 785 598 61 1,686 2,508 (118) (94) 61 1,568 2,414 Table 3 The Panamanian Water Authority WATER PRODUCTION DATA 1974 1973 1972 WATER SOLD AS A PERCENTAGE OF WATER PRODUCED AND DELIVERED TO THE DISTRIBUTION SYSTEM Panama City Colon City Interior Provinces Total 79% 70% 54% 72% 83% 71% 62% 77% 81% 67% 63% 76% VOLUME OF WATER PRODUCED AND PURCHASED (millions of gallons) 24,108 22,029 19,807 VOLUME OF WATER SOLD (millions of gallons) 17,500 17,085 15,112 AVERAGE INCOME PER THOUSAND GALLONS .35 ..37 .41 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 someti -- you'll get a wrong answer if you end up using two negative signs. For example, money uncollectable accounts is expressed in negative, that does not mean you will subtract it ag when calculating average collection period. Two negative signs will make it positive. Th you'll end up adding uncollectibles to receivables. A similar negative sign problem you m 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 ra 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 ef Some water is purchased from Canal Zone facilities and used in Panama Cly