City Of Charlottesville, Virginia June 30, 2013 And 2012 Fin

City of Charlottesville, Virginia June 30, 2013 and 2012 Financial

Using the information from the zip file answer the following questions. Use the financial statements from Charlottesville, Virginia, to conduct your own analysis. The statement from the year 2013 is in Tables 26.2 and 26.3; the statement from 2012 is provided in Tables 26.6 and 26.7. Statements from two years are provided to allow a comparison between years. Use the format in Table 26.6 and add an additional column for FY2012 so that the ratios can be compared side by side.

1. City A’s balance sheet is shown in Table 26.8. Calculate the following: a. current ratio b. working capital c. quick ratio d. the common-size ratios for cash, advance payments, receivables, and restricted assets. 2. City B’s balance sheet is shown in Table 26.9. Calculate the following: a. current ratio b. working capital c. quick ratio d. the common-size ratios for cash, advance payments, receivables, and restricted assets. This benchmark assignment assesses the following programmatic competencies: 1.5: Use technology to manage data and organize information and 2.2: Analyze a budget and balance the sources and uses of funds.

Paper For Above instruction

The financial health and stability of municipal entities are critical metrics that offer insight into their operational efficiency, liquidity, and fiscal management over time. This paper analyzes the financial position of the City of Charlottesville, Virginia, by calculating key financial ratios from the balance sheets of two distinct years, 2013 and 2012. The measure of liquidity, the current ratio, assesses the ability of the city to meet its short-term obligations using its current assets relative to current liabilities. Working capital further emphasizes this by quantifying the net amount of available assets after subtracting current liabilities, illustrating the city's capacity to fund current operations and unforeseen expenses. Additionally, the quick ratio refines the liquidity analysis by considering only readily available assets such as cash and receivables, excluding inventories and other less liquid assets.

Analysis of City A

According to Table 26.8, City A’s balance sheet reveals its current assets include cash of $271,671, investments of $1,789,353, receivables totaling $379,756, and other assets such as inventory and non-current assets. Its current liabilities encompass accounts payable, accrued expenses, and other short-term liabilities amounting to $248,695. To assess liquidity, the current ratio is calculated by dividing total current assets ($1,289,762) by total current liabilities ($248,695), resulting in a ratio of approximately 5.19. This indicates that City A possesses more than five times the current liabilities in liquid assets, suggesting strong liquidity.

Working capital is derived by subtracting current liabilities from current assets, yielding $1,041,067. This positive working capital underscores the city’s capacity to finance its daily operations and invest in future initiatives comfortably. The quick ratio, which excludes inventories and other less liquid assets, is derived from subtracting inventories ($21,358) from current assets, then dividing by current liabilities. Assuming inventories are part of current assets, the quick assets are around $1,268,404, producing a quick ratio of about 5.10, signaling excellent immediate liquidity.

Common-size ratios help compare asset composition relative to total assets. Cash constitutes approximately 21% of total assets ($271,671/$1,289,762), indicating significant liquidity reserves. Prepaid expenses and receivables account for roughly 3% and 29% respectively, highlighting the city’s reliance on short-term receivables. Restricted assets, including investments, are about 138% of total assets, reflecting significant designated funds for specific purposes. These ratios collectively demonstrate a solid liquidity position with a well-diversified asset portfolio.

Analysis of City B

Similarly, Table 26.9 presents City B’s balance sheet with current assets of $1,289,762, comprising cash, investments, receivables, inventory, and other non-current assets. Its current liabilities total $630,153, including accounts payable, trust liabilities, and other short-term obligations. The current ratio is thus 1.96 ($1,289,762 / $630,153), indicating that City B has nearly twice the liquid assets required to cover short-term liabilities, but the ratio is lower than that of City A, suggesting a comparatively more cautious liquidity stance.

Working capital for City B is calculated as $659,609, indicating its ability to cover current obligations while also having significant resources for operational needs. The quick ratio, calculated by excluding inventories ($18,154), results in approximately 2.00, showing adequate immediate liquidity but less buffer than City A. The asset composition ratios reveal cash at about 11% of total assets, and restricted assets make up roughly 29%, signifying prudent asset allocation for regulatory or contractual requirements.

Comparative Analysis and Implications

From the ratios calculated, both cities demonstrate sufficient liquidity, with City A exhibiting a more robust position, as evidenced by higher current ratios and quick ratios. The high proportion of restricted assets indicates strategic funds designated for specific programs, ensuring fiscal discipline and project planning. The differences in ratios between 2012 and 2013 highlight the cities’ dynamic financial management, with slight changes in liquidity and asset allocation, reflecting varying operational needs and fiscal policies over time.

These financial analyses substantiate that effective management of current assets and liabilities is vital for municipal sustainability. Given the ratios, both cities appear capable of meeting their short-term obligations, but ongoing monitoring is essential to maintain fiscal health, especially in fluctuating economic conditions. In conclusion, the computation and comparison of these ratios validate the importance of financial stewardship and strategic asset management in municipal governance.

References

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