One of the challenges of financial analysis in government is that it is not always obvious whether an increase in financial ratio is a sign of increasing or decreasing fiscal strength.

Explain the significance of each of the following ratios. For each of the ratios indicate whether an increase can be interpreted as a sign (1) or (2) decreasing fiscal strength. Where appropriate, show how an increase in the ratio can be interpreted as a sign of either. Explain and justify your response.

1. Cash, short-term investments, and receivables/current liabilities

2. Revenue from own sources/median family income

3. Number of employees/population

4. Property tax revenues/total operating revenues

5. Nondiscretionary expenditures/total expenditures

6. Unassigned general-fund balance/total operating revenues

7. Intergovernmental revenues/ total operating revenues

8. Expenditures for public safely/ total expenditures