PUBPOL 522 Ratios: Meaning, Formula & Category

Short-run financial position

How much rainy-day money is there, compared with a year of income? Higher is safer.

Liquidity

Could the city pay everything it owes right now with the cash it has? Higher is safer.

Near-term solvency

How big are all the city's obligations compared with a year of income? Lower is safer.

Debt burden

If the debt were split evenly, how much would each resident owe? Lower is better.

Coverage ratio 1

What share of spending goes to loan payments instead of services? Lower is better.

Coverage ratio 2

Do the city's business-like services earn enough to cover their loan interest? Higher is better.

Net asset growth

Is the city's net worth (what it owns minus what it owes) growing? Higher is better.

Operating margin

After fees and grants that services earn directly, how much of the revenue is still needed to pay for them? Lower is better.

Own-source revenues

How much of the city's income comes from outside grants? Lower means less reliance on outside money.

Capital asset condition

Is the city's stock of roads, buildings and equipment growing or wearing out? Higher is better.

Unassigned General Fund balance ÷ General Fund revenues

Short-run financial position

General Fund cash + investments ÷ General Fund liabilities

Liquidity

Primary government liabilities ÷ primary government revenues

Near-term solvency

Total primary government debt ÷ population

Debt burden

Governmental fund debt service ÷ General Fund expenditures

Coverage ratio 1

Enterprise funds' operating revenues ÷ interest expense

Coverage ratio 2

Change in governmental net position ÷ beginning governmental net position

Net asset growth

(Net expense for governmental activities ÷ governmental revenues) × −1

Operating margin

Operating grants and contributions ÷ primary government revenues

Own-source revenues

(Ending − beginning net value of capital assets) ÷ beginning net value

Capital asset condition

Liquidity (can they pay bills now?)

Short-run financial position, Liquidity

Solvency (can they handle debts long-term?)

Near-term solvency, Debt burden, Coverage ratio 1, Coverage ratio 2

Profitability (is net worth growing?)

Net asset growth, Operating margin, Own-source revenues

Long-term condition (are assets wearing out?)

Capital asset condition