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<br />2. Revenues in the Debt Service Fund are based on property tax revenues and <br />interest income. Reserves in the Debt Service Fund are designed to provide <br />funding between the date of issuance of new debt and the time that property tax <br />levies are adjusted to reflect the additional debt. Article 10, Section 10.02 of the <br />City Charter requires that the City maintain a reserve balance of two percent of all <br />outstanding general obligation debt. <br /> <br />D. Ratios/Trend Analysis - <br /> <br />Ratios and significant balances will be incorporated into financial reports. This <br />infom1ation will provide users with meaningful data to identify major trends of the City's <br />finances through analytical procedures. We have selected the following ratios/balances as <br />key indicators: <br /> <br />. Fund Balance: <br /> FB <br />. Working Capital: <br /> CA - CL <br />. Current Ratio: <br /> CAlCL <br />. Quick Ratio: <br /> CAlCL <br />. Debt Ratio (%): <br /> CL+LTLlTA <br />. Enterprise Operational <br /> Coverage: <br /> OR/OE <br /> <br />Assets Less Liabilities <br />AL (Acceptable level)>25.0% of Expenditures <br /> <br />Current Assets Less Current Liabilities <br />AL > 25.0% of Expenses <br /> <br />Current Assets Divided By Current Liabilities <br />AL> 1.00 <br /> <br />"Liquid" Current Assets Divided By Current Liquid <br />Liabilities <br />AL > 1.00 <br /> <br />Current Liabilities Plus Long Term Liabilities <br />Divided By Total Assets <br />AL< 1.00 <br /> <br />Operating Revenue Divided By Operating <br />Expense <br />AL> 1.20 <br /> <br />Our goal is to develop minimum/maximum levels for the ratios/balances above through <br />analyzing the City's historical trends and anticipated future trends. We will also analyze <br />and compare the City to other municipalities to develop these acceptable levels. <br /> <br />City of San Marcos Financial Policy - Revised April 2004 <br /> <br />Page 20 <br />