© D.L. Crumbley
Office of New York State Comptroller
Indicator 6: Liquidity
Cash and Investment as a Percentage of Current Liabilities
Cash and Investments as a Percentage of Gross Monthly Expenditures
Negative Trend: Percentages decreasing over time.
A government should generally have year-end cash equal to about 50% of current liabilities and 75% of average monthly expenditures. A governmental accounting textbook states that this quick ratio (or acid test) omits receivables and amounts due from other funds because of difficulties converting them into cash. They suggest that a large state government should consider a quick ratio of less than 50 *
Indicator 7: Long-Term Debt
Negative Trend: Percentage increase over time
Note: An increase in #7 would likely trigger a future increase in #3 formula as well as a decrease in #8.
Indicator 8: Capital Outlay
Negative Trend: Percentage decreasing over time
Note: This eighth indicator is an early warning sign of financial stress. * Razek and Hosch, ibid., p.411.