Three major categories of a state or local government: Governmental Activities Business Type Enterprises Component Units The immediate ability of a Government to pay its current debts as they come due. Current ratio: Current Assets Current Liabilities A current ratio of 2:1 or better are benchmarks that are typically used in the private sector. Average 3.35 Liquidity: Current ratio ranged from 1.9 to 6.2 with an average of 3.35. Thus, governments tend to be very conservative in the amount of current assets (especially Hampton) that they hold for payment of current liabilities. average 4.94 Liquidity: Current ratio ranged from 1.3 to 9.6 with an average of 4.94. In many cases, surplus cash was transferred from Business-Type Enterprises to Government Activities. average 2.11 Liquidity: Current ratio ranged from 1.3 to 3.1 with an average of 2.11. Current ratio is close to the 2.0 benchmark. Average 3.083.08 Average A determinant of Government’s ability to meet its service delivery and financial commitments both now and in the future Debt Ratio: A ratio of 1:1 or less would generally be desired. Liabilities Net Assets Average1.64 Solvency: The Liabilities/Net Assets ratio ranged from 0.5 to 3.5 with an average of 1.64. Newport News and Portsmouth tend to be more liberal in their debt policies than the other cities in the sample. average 1.01 Solvency: The Liabilities/Net Assets ratio ranged from 0.2 to 1.9 with an average of 1.01. The business enterprises appeared to carry excess liabilities in two of the cities (Hampton and Norfolk) where the ratio exceeded 1.0. average 0.71 Solvency: The Liabilities/Net Assets ratio ranged from 0.3 to 1.4 with an average of 0.71. Most component units (except Newport News) in the sample tend to be conservative in their debt policies. Average 1.13 Average 1.13 In the solvency ratios, it would be beneficial to include the Unfunded Accrual Actuarial Liability with the total liabilities. However, this is currently not required by GASB. If these UAAL had been included, the solvency ratios would have been much higher. Questions?