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?