Ratios can help users assess fiscal condition of companies. This problem calculates and utilizes several primary ratios and financial comparisons to determine how one city compares to another in various spending and revenue trends. This case feaures information from a small mid-western town related to revenues, tax collections and expenses. The answers involve calculating ratios and applying them to given financial information.
The answers to these problems will need to be used in conjunction with the attachment that illustrates the problem.
The way to think about ratios is much like answering word problems. First, you need to figure out what the question is asking, then make sure that your answer makes sense.
Some of these ratios are very straightforward. They are asking what percentage of a total a specific expenditure encompasses. The answer is a percentage of the whole. The percentage can be compared to other statistics and a conclusion can be drawn.
Some of the ratios requested are standard financial ratios, such as the current ratio.
This is current assets/current liabilities. The point of ...
Illustrates how to calculate several commonly used ratios, and analysis as to what the ratio data indicates for the financial statements being compared.