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Key financial Indicators allow a utility to get a snapshot of its financial health and determine whether it needs to adjust its rates or consider regional solutions. These benchmarks should be calculated annually when financial statements are released. Please see the other overviews in the Financial Benchmarks Series for a more complete financial picture. The NC Collaboratory graciously funded the Financial Bookmark Series.

 

Financial Bookmark Series Quick Guide with Where to Find Parameters
This file contains reference calculations to all of the key financial indicators identified by the EFC and where to find parameters.

Operating Ratio
Operating Ratio (also known as the cost-recovery ratio) is a measure of the system’s self-sufficiency. Water and wastewater enterprise funds should strive to be self-supporting and should at least be able to cover expenses using revenues.

Percent Capital Assets Depreciated
Percent Capital Assets Depreciated shows how much of the infrastructure’s (i.e., capital assets) value has been lost over time and is a proxy for the life remaining in the life of utilities’ assets.

Debt Service Coverage Ratio
Debt Service Coverage Ratio measures a system’s ability to pay its long-term debts by calculating whether a system has enough operating revenue to cover operating expenses, and then cover debt service payments.

Days Cash On Hand
Days Cash on Hand is a measure of financial security. In essence, this is how much cash a system has saved up that isn’t earmarked for anything else (unrestricted cash) and estimates the number of days the system can pay its daily operation and maintenance costs before running out of this cash.

Quick Ratio
Quick Ratio, also known as Current Ratio, is a measure of short-term liquidity, or a system’s ability to pay its current (i.e., annual) bills. In other words, could your system pay all the bills you will need to pay that year with the cash you have on hand?

 

 

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