Question

Different activities can indicate signs of strength, weakness, or a neutral effect on the financial condition of a company. Analyze activities that indicate strong and weak financial conditions. Conclude how five of the following activities affect the financial condition of a company and provide support for your conclusions:

Revenues over expenditures

Intergovernmental revenues

Level of business activity

Education level of citizens

Unemployment rate

Restrictions on revenues

Personal income per capita

Debt service

Percentage of households below the poverty level

Short-term borrowing

Property values

Population growth

Political party of the mayor

Unfunded pension liability

Operating deficit.

Answer 1

Revenues over expenditures : Excess of Revenues over expenditures is a surplus to the company. Such surplus can be utilised for the expansion and diversification of the business. If the surplus is high then more dividend will be declared to the stockholders which will improve investors confidence and attract more investors. Thus high margin of revenues over expenditures is beneficial for the financial position of the business. It indicate a sign of strength on the financial condition of a company.

Intergovernmental revenues : A high volume of intergovernmental revenues will indicate that the taxes charged on inter-state business is high. This will incurr a high rate of operating expense for the business. It indicate a sign of weakness on the financial condition of a company.

Level of business activity : An increase in the level of business activity will lead to an increase production and sales. This will result in increase of operating profit and a good financial position. It indicate a sign of strength on the financial condition of a company.

Education level of citizens : Education level of the employee plays a vital role in company. If there are ample number of educated human resource available in the market then it will be easy to recruit and employee skilful and educated employees in the company. Such resource will improve the operational effectiveness and efficiency of the company. It indicate a sign of strength on the financial condition of a company.

As per policy, I can solve four sub parts of a question.