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Forensic Accounting, Forensic Techniques, and Fraud Detection Copyrighted 2001 D. Larry Crumbley, ... - page 334 / 352

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© D.L. Crumbley

Assess Financial Health

Solvency:

Liquidity:

Financial Performance:

Financial Position:

Increasing

Decreasing

Measures a government’s long-term financial viability by comparing the extent to which assets are financed by incurring long-term debt.

Measures the government’s ability to generate a stream of inflows sufficient to make interest payments.

Long-term Debt / Assets

(Change in Net Assets + Interest Expense) / Interest Expense

Decreasing

Measures the extent to which current liabilities are covered by the more liquid current assets.

(Cash + Current Investments + Receivables) / Current Liabilities

Decreasing

Decreasing

Measures a government’s financial performance during the current fiscal year by comparing the change in the Net Assets derived from the Statement of Activities to the total net assets.

Measures the extent to which the cost of services are paid for out of general revenues.

Change in Net Assets Total Net Assets

(General Revenues + Transfers) / Expenses

Decreasing

Measures a government’s ability to provide basic government services

Unrestricted Net Assets Expenses

Negative Indicator

Purpose

Ratio

Source: B.A. Chaney, D.M. Mead, and K.R. Schermann, “The New Governmental Reporting Model,” Journal of Governmental Management, Spring 2002, p. 29.

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