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A Municipality is not allowed to approve a budget if it is not cash funded. Gross Debtors is the balance of debtors that are classified as current. Only consumer debtors are considered current for financial statement purposes.
A Municipality is not allowed to approve a budget if it is not cash funded. Gross Debtors is the balance of debtors that are classified as current. Only consumer debtors are considered current for financial statement purposes.
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Attribution Non-Commercial (BY-NC)
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A Municipality is not allowed to approve a budget if it is not cash funded. Gross Debtors is the balance of debtors that are classified as current. Only consumer debtors are considered current for financial statement purposes.
Авторское право:
Attribution Non-Commercial (BY-NC)
Доступные форматы
Скачайте в формате PDF, TXT или читайте онлайн в Scribd
Working Capital Ratios Current Assets Current Liabilities Cash Coverage Ratio Cash and cash equivalents at Year End x 100 [%] Fixed Monthly Operating Cash Payments Cash Funded [(Budgeted surplus for the financial year & provision for impairments)/ gross increase in debtors] x 100 [%] Gross Debtors to Annual Revenue Gross debtors x 100 [%] Liquidity Ratio (Current Ratio) This ratio indicates the extent to which current assets can be used to settle short-term liabilities. If current assets do not exceed current liabilities it means liquidity problem i.e. insufficient cash to meet financial obligations. Current asset must be increased to settle current liabilities or non- current assets will need to be liquidated to settle current liabilities. Current Assets : Total Current Assets as reflected in the Statement of Financial Position. Current Liabilities : Total Current Liabilities as reflected in the Statement of Financial Position. Indicates the municipality's ability to meet at least its monthly fixed operating commitments without collecting any additional revenue during that month. Cash and cash equivalents : Is the sum of all cash available in a current account, daily call deposit or any other deposit with a call period of 90 days or less. Fixed Monthly Operating Cash Payments : Any expenditure which becomes payable during the month by way of a contract, lease agreement or any other arrangement committing the municipality to such a payment. Examples will include bulk purchases, debit orders for lease or other agreements, short-term insurance, instalments on loan agreements, salaries and Councillor allowances. Actual Billed Revenue This ratio indicates whether the budget for the year under review was cash funded. A Municipality is not allowed to approve a budget if it is not cash funded. Budgeted surplus: is the difference between budgeted income and expenditure for the year in which the statements of financial performance has been produced. Permission for impairments: is the amount set aside for bad debt gross increase in debtors between the current year and previous years. Gross Debtors : Is the balance of debtors that are classified as current for financial statement purposes. Only consumer debtors are taken into account for the purpose of this ratio. Actual Billed Revenue : Total of all billing done during one financial year for all services rendered on credit. This ratio indicates the percentage of gross debtors to revenue. It focuses on the period that it takes to recover payment in respect of amounts levied for services rendered on credit. It takes into account the major revenue sources that gives rise to consumer and consumer debtors. It is generally not comparable between municipalities if there have been significant write- offs of debtors' balances outstanding in prior year periods. It may indicates the effectiveness of credit control procedures. RATIO MEANING OF RATIO / OBJECTIVE DEFINITIONS Short term debt as a total to revenue (Short term debt/total revenue) x 100 [%] Gross Debtors Days Gross Debtors x 365 Gross debtors - bad debt provision x 100 [%] Net Debtors Days (Gross Debtors - Provision for Bad Debts) x 365 Annual Collection Rate [100 - (Movement in Consumer Gross Debtors)] % Billed revenue Net Debtors to Annual Revenue This ratio reflect the collection period. Indicates the number of days that debtors' balances will be received excluding those debtors' balances that are irrecoverable or for which a bad debt has been raised. It also indicates the extent to which provision has been made for irrecoverable debtors' balances. Gross Debtors : Is the balance of debtors that are classified as current for financial statement purposes. Only consumer debtors are taken into account for the purpose of this ratio. Provision for Bad Debts : Is the amount set aside as a provision in the accounting record. Actual Billed Revenue : Total of all billing done during one financial year for all services rendered on credit. Gross Debtors : Is the balance of debtors that are classified as current for financial statement purposes. Only consumer debtors are taken into account for the purpose of this ratio. Provision for Bad Debts : Is the amount set aside as a provision in the accounting record to take into account the possible non-payment by debtors. Actual Billed Revenue : Total of all billing done during one financial year for all services rendered on credit. This ratio indicates the percentage of net debtors to revenue. The ratio focuses on the period that it takes to recover payment in respect of those amounts that are deemed to be recoverable. It therefore only takes into account the major revenue sources that give rise to consumer and consumer debtors, excluding bad debts provisions. It indicates the effectiveness of credit control procedures and enables assessment of the provision for bad debts. Actual Billed Revenue Actual Billed Revenue This ratio reflects the collection period. It indicates the number of days from billing to collection of revenue earned on credit. It may indicates the effectiveness of credit control procedures. Gross Debtors : Is the balance of debtors that are classified as current for financial statement purposes. Only consumer debtors are taken into account for the purpose of this ratio. Actual Billed Revenue : Total of all billing done during one financial year for all services rendered on credit. Actual Billed Revenue This indicates the collection rate as a percentage of revenue billed on credit. It measures increases in debtors relative to annual billed revenue.. Movement in Consumer Gross Debtors : Is the difference of the balance of debtors at year end minus the balance of debtors at the beginning of the year that are classified as current for financial statement purposes, but excluding the short term portion of long term debtors. Actual Billed Revenue : Total of all billing done during one financial year for all services rendered on credit. This ratio indicates short-term debt as a percentage of total revenue. The accumulation of short term debt may indicate cash flow difficulties. Short-term debt: Is the current portion of loans and borrowings, trade and other payables, vat payables and short-term employee benefits. Total revenue: Expenditure that will be credited in the income statement for financial statement purposes in accordance with the prescribed financial statement formats. RATIO MEANING OF RATIO / OBJECTIVE DEFINITIONS Bad Debt Provision (Budget) x 100 [%] Budgeted Billed Revenue Trade Creditors Outstanding x 365 Credit Purchases Expenditure Efficiency Ratios Capital Costs x 100 [%] Operating Expenditure Personnel Costs x 100 [%] Total Operating Expenditure Personnel Costs to Total Operating Expenditure Indicates the extent to which expenditure is applied to the payment of personnel. Indicates the extent to which personnel expenditure relative to total operating expenditure is manageable and the extent to which personnel cost increases impact on total budgeted expenditure. Personnel Costs : The amount expended on employees, both part-time, full-time and section 57 contract staff and which cost relates directly to the employment of personnel including Councillor remuneration. Total Operating Expenditure : Expenditure that will be credited in the income statement for financial statement purposes in accordance with the prescribed financial statement formats. Debtors Impairment Provides an indication of the extent to which only realistically collectable revenue is included in the budget as revenue. Creditors Payment Period This indicates the average number of days for creditors to be paid. The acceptable norm is 30 days. A period of longer than 30 days to settle creditors is normally an indication that the municipality is experiencing cash flow problems. Trade Creditors Outstanding : The amount of creditors not being paid at year end or a specific time during the year. Credit Purchases : The amount of credit purchases for the financial year or a specific period of time. Provision for Bad Debts (Budget): Is the amount set aside as a provision in the budget to take into account the possible non-payment by debtors. Budgeted Billed Revenue: Total of all budgeted billing done during one financial year for all services rendered on credit. Capital Costs to Total Operating Expenditure The cost required to service external interest on borrowings and depreciation. It is effectively the ongoing operating cost associated with infrastructural and other development. Capital Costs : Constitutes the interest to service external loans as well as the depreciation, amortisation and impairment losses recognised as an expense in the Statement of Financial Performance. Operating Expenditure : Expenditure that will be debited in the Statement of Financial Performance but excluding losses on disposal of property, plant and equipment and any fair value adjustments recognised as expenses. RATIO MEANING OF RATIO / OBJECTIVE DEFINITIONS Personnel Costs to Total Operating Revenue Personnel Costs x 100 [%] Total Operating Revenue Total Operating Expenditure to Total Operating Revenue Total Operating Expenditure x 100[%] Total Operating Revenue Repairs and maintenance costs x 100 [%] Total expenditure Electricity Distribution Losses (Percentage) Number of Electricity Units Purchased - Number of Electricity Units Sold as a percentage lndlcaLes Lhe exLenL Lo whlch revenue ls applled Lo Lhe paymenL of personnel. rovldes assurance LhaL proporLlon of personnel expendlLure Lo revenue ls manageable and Lhe lmpacL of personnel cosL lncreases on Lhe budgeL. Personnel Costs : The amount expended on employees, both part-time, full-time and section 57 contract staff and which cost relates directly to the employment of personnel. It does not include Councillor allowances. Total Operating Revenue : Revenue that will be credited in the income statement for financial statement purposes in accordance with the prescribed financial statement formats. Percentage loss of potential revenue for electricity through electricity units purchased but not sold as a result of losses incurred through theft (illegal connections), non or inaccurate metering or wastages as a result of dilapidated infrastructure. Number of Electricity Units Purchased : Is the total number of electricity units purchased during one financial year as reflected on the Eskom accounts. Number of Electricity Units Sold : Is the total number of electricity units billed for conventional meters plus the total number of electricity units sold for prepayment meters during one financial year. lL lndlcaLes Lhe exLenL of operaLlng expendlLure Lo operaLlng revenue. 1hls raLlo provlde assurance LhaL Lhe proporLlon of operaLlng expendlLure Lo revenue ls manageable. Total Operating Expenditure : Expenditure that will be debited in the income statement for financial statement purposes in accordance with the prescribed financial statement formats. Total Operating Revenue : Revenue that will be credited in the income statement for financial statement purposes in accordance with the prescribed financial statement formats. Repairs and Maintenance to Total Operating Expenditure Indicates the extent of repairs and maintenance expenditure relative to total operating expenditure. The ratio will indicate whether there is insufficient monies being spent on repairs and maintenance and that possible asset stripping is taking place. Repairs and Maintenance : The amount spent on repairs and maintenance as disclosed in the income statement. Total Operating Expenditure : Expenditure that will be debited in the income statement for financial statement purposes in accordance with the prescribed financial statement formats. RATIO MEANING OF RATIO / OBJECTIVE DEFINITIONS Number of Kilolitres Water Purchased or Purified - Number of Kilolitres Water Sold as a percentage Budget Implementation Actual Operating Expenditure x 100 [%] Budgeted Operating Expenditure Actual Operating Revenue Budgeted Operating Revenue x 100 [%] Service charges and Property Rates Revenue Budget Implementation Indicator Actual Service Charges and Property Rates Revenue Budgeted Service Charges and Property Rates Revenue x100[%] Operating Expenditure Budget Implementation Indicator Operating Revenue Budget Implementation Indicator This ratio measures the extent of actual operating revenue received in relation to budgeted operating revenue during the financial year. Under collection normally indicates problems relating to incorrect budgeting or ineffective billing. Actual Operating Revenue : Revenue that will be credited in the income statement for financial statement purposes in accordance with the prescribed financial statement formats. Budgeted Operating Revenue : Revenue budgeted that will be credited in the income statement for financial statement purposes in accordance with the This ratio measures the extent of actual service charges and property rates revenue received in relation to budgeted service charges and property rates revenue during the financial year. Under collection normally indicates problems relating to incorrect budgeting or ineffective billing. Actual Service Charges and Property Rates Revenue : Revenue that will be credited in the income statement for financial statement purposes in accordance with the prescribed financial statement formats. Budgeted Service Charges and Property Rates Revenue : Revenue budgeted that will be credited in the income statement for financial statement purposes in accordance with the prescribed financial statement formats. Water Distribution Losses (Percentage) Percentage loss of potential revenue for water through kilolitres water purchased but not sold as a result of losses incurred through theft (illegal connections), non or incorrect metering or wastages as a result of dilapidated infrastructure This ratio measures the extent to which budgeted operational expenditure has been spent during the financial year. Underspending may indicate that a municipality experiences possible cash flow difficulties, capacity challenges to undertake budgeted service delivery or does not prepare accurate budgets. Overspending may also indicate inaccurate budgeting or poor financial management control in respect of budget control. Actual Operating Expenditure : Expenditure that will be debited to the income statement for financial statement purposes in accordance with the prescribed financial statement formats. Budgeted Operating Expenditure : Expenditure budgeted that will be debited to the income statement for financial statement purposes in accordance with the prescribed financial statement formats. Number of Kilolitres Water Purchased or Purified : Is the total number of kilolitres water purchased during one financial year as reflected on the service provider accounts or kilolitres water purified as per meter readings taken. Number of Kilolitres Water Sold : Is the total number of kilolitres water billed for conventional meters plus the total number of kilolitres water sold for prepayment meters during one financial year. RATIO MEANING OF RATIO / OBJECTIVE DEFINITIONS Actual Capital Expenditure x 100 [%] Budgeted Capital Expenditure Debt Ratios Non Current Liabilities x 100 [%] Actual Operating Revenue Total Debt x 100 [%] Total annual operating revenue Interest coverage ratio (Income from operating activities/interest payable) x 100 [%] Total Debt to Annual Operating Revenue Indicates the extent of long and short-term liabilities in relation to revenue. The purpose of the ratio is to provide assurance that sufficient revenue will be generated to repay liabilities. Total Debt : Aggregate of long-term liabilities, short- term liabilities including bank overdrafts, hire purchase liabilities and finance lease liabilities but excluding trade creditors, consumer deposits, payments in advance from consumers and provisions. Total Annual Operating Revenue : Revenue from all sources that will be credited to the income statement for financial statement purposes but excluding revenue from conditional grants, public contributions and donations, gains on disposal of property, plant and equipment, and any fair value adjustments recognised as revenue. 1hls raLlo lndlcaLes Lo whaL exLend lnLeresL payable on exLernal loans ls covered by lncome generaLed from operaLlng acLlvlLles. 1he flnanclal lnsLlLuLlons expecL a coverage of aL leasL 200 Income from operat|ng act|v|t|es: amounL reflecLed ln Lhe cash from sLaLemenLs. Interest payab|e: amounL payable Lo flnanclal lnsLlLuLlons Lo serve exLernal loans as reflecLed ln Lhe cash flow sLaLemenL. Non Current Liabilities to Revenue This ratio indicates debt financing relative to the operating revenue of a municipality. It measures the percentage of annual operating revenues that will be required to repay debt. Non Current Liabilities : Total non current liabilities as reflected in the Statement of Financial Position. Actual Operating Revenue : Revenue that will be credited in the income statement for financial statement purposes in accordance with the prescribe Capital Expenditure Budget Implementation Indicator This ratio measures the extent to which budgeted capital expenditure have eventually been spent during the financial year. Underspending normally is an indicator that the municipality experiences possible cash flow difficulties or capacity problems to implement projects. Actual Capital Expenditure : Is the amount of capital expenditure disclosed as additions to property, plant and equipment in the annual financial statements, excluding any revaluation adjustments. Budgeted Capital Expenditure is the amount that is budgeted to be spent on capital expenditure during the financial year. RATIO MEANING OF RATIO / OBJECTIVE DEFINITIONS Total Liabilities x 100 [%] Total Assets Funding Ratios Funding options employed for working capital [(Operating surplus + Consumer deposits) / net current assets] x 100 [%] Funding options employed for non current accounts [Long-term liabilities + Capital Funds) / non current assets] x 100 [%] Future Operating Ratio Cash available for operating purposes (Cash -[cash allocations to capital funds]+ Payment Level [Budgeted Income]/Budgeted expenditure) Net Asset Position Indicates the wealth of the Municipality and the extent to which lenders and creditors have financed the assets of the Municipality relative to the extent to which the Municipality has financed its assets. The smaller the ratio, the wealthier is the Municipality. Total Liabilities : Total Liabilities as reflected in the Statement of Financial Position. Total Assets : Total Assets as reflected in the Statement of Financial Position. Operating surplus: Is that portion of the accumulated surplus set aside for operating purposes and accrued through the operating account. Consumer deposits: Is made paid by consumers as part of the working capital. Net current assets only represent current assets/liabilities without cash relevant transactions. The ratio indicates whether working capital was financed from the portion of the accumulated surplus allocated to the operating requirements. A Municipality can not use allocated capital funds or borrowing to finance operating requirements. This ratio indicates whether only capital funds were use to finance non current assets. Municipalities do not borrow timeously and use income creditors and funds set aside for specific purposes to finance non current assets. Long-term liabilities: Represents external borrowing. Capital funds: Is the capitalization reserve and portion of the accumulated surplus used to finance capital projects. Non current assets represents property, plant and equipment, intangible assets and loans and receivables. This ratio indicates whether enough cash is available to finance the next years operating requirements. Cash allocated for capital projects is deducted and the budgeted income is reduce by the collection rate. It indicates whether the operating requirements for the next year can be met. Cash allocation to capital funds: Means the cash allocated to the housing fund, internal finance reserve and unspent conditional grant. Payment level: Means the payment level calculated in terms of payment ratio. Budgeted Income: Revenue budgeted that will be credited in the income statement for financial statement purposes in accordance with the prescribed financial statement formats.