NEAR TERM INDICATORS. 1.a. Current Ratio (Working Capital Ratio): Current Assets divided by Current Liabilities Preliminary Rating Final Rating (Following Additional Analysis)
NEAR TERM INDICATORS. Current Ratio Current Ratio = Current Assets ÷ Current Liabilities The current ratio shows the relationship between a school’s current assets and current liabilities. Current assets are balance sheet accounts (e.g. cash, receivables) that include the value of all assets that are expected to be converted to cash through normal operations within the current fiscal year. Current liabilities represent obligations (e.g. payables, accrued payroll, accrued vacation) that are payable in cash within a fiscal year. This ratio gives an indication of a school’s ability to pay its obligations over the next twelve months. A school may be at-risk if it is unable to meet its current obligations. This indicator accounts for 10 percent of a school’s aggregate final risk assessment. Low Acceptable Moderate High Significant Ratio is greater than (>) 1.5 Ratio is between 1.35 – 1.5 Ratio is between 1.2 – 1.35 Ratio is between 1.0 – 1.2 Ratio is less than (<) 1.0 Unrestricted Days of Cash on Hand Unrestricted Days Cash = Days Cash ÷ [(Total Expenses – Depreciation Expense) ÷ 365] The unrestricted days of cash on hand provides the number of days a school can pay its current expenses without another inflow of cash. Cash balances fluctuate since schools can expend and receive money on an almost daily basis. It indicates whether a school maintains a sufficient cash balance to meet its cash obligations. A school may be at-risk if there is insufficient cash to meet its cash obligations. The indicator looks at a fixed point in time (the time the financial statement is prepared) and a trend over a period of time. Although this indicator is at a fixed point in time, it tells whether a school may have challenges in meeting its cash obligations. Note that this indicator looks at unrestricted cash, not cash that already has been earmarked for a specific purpose, such as renovations or facilities. This indicator accounts for 35 percent of a school’s aggregate final risk assessment. Low Acceptable Moderate High Significant Days Cash is more than 60 days and having an upward or downward trend over three years or more Days Cash is between 50 – 60 days and having an upward or downward trend over three years or more Days Cash is between 30 – 50 days and having an upward or downward trend over three years or more Days Cash is between 20 – 30 days and having an upward or downward trend over three years or more Days Cash is less than 20 days and having a downward trend over three years or more Sust...
