1. Copyright © Texas Education Agency, 2012. All rights reserved. 1 Assessing Financial Information Statistics & Risk Management

2. Copyright © Texas Education Agency, 2012. All rights reserved. “Copyright and Terms of Service Copyright © Texas Education Agency. The materials found on this website are copyrighted © and trademarked ™ as the property of the Texas Education Agency and may not be reproduced without the express written permission of the Texas Education Agency, except under the following conditions: 1)Texas public school districts, charter schools, and Education Service Centers may reproduce and use copies of the Materials and Related Materials for the districts’ and schools’ educational use without obtaining permission from the Texas Education Agency; 2) Residents of the state of Texas may reproduce and use copies of the Materials and Related Materials for individual personal use only without obtaining written permission of the Texas Education Agency; 3) Any portion reproduced must be reproduced in its entirety and remain unedited, unaltered and unchanged in any way; 4) No monetary charge can be made for the reproduced materials or any document containing them; however, a reasonable charge to cover only the cost of reproduction and distribution may be charged. Private entities or persons located in Texas that are not Texas public school districts or Texas charter schools or any entity, whether public or private, educational or non-educational, located outside the state of Texas MUST obtain written approval from the Texas Education Agency and will be required to enter into a license agreement that may involve the payment of a licensing fee or a royalty fee. Call TEA Copyrights with any questions you have.

3. Copyright © Texas Education Agency, 2012. All rights reserved. Two Main Sources Internal Internal – Finance Department – Accounting Department External External – News Media – Universities – Government 3

4. Copyright © Texas Education Agency, 2012. All rights reserved. Technology Computerized Financial Accounting Systems. Computerized Financial Accounting Systems. Web Browser Based Markets & Brokers. Web Browser Based Markets & Brokers. Hand-Held Delivery Systems. Hand-Held Delivery Systems. TV and Radio Delivery Systems TV and Radio Delivery Systems 4

5. Copyright © Texas Education Agency, 2012. All rights reserved. Preliminary Assessment Consider the Source. Consider the Source. Consider the Objective. Consider the Objective. Consider the Audience. Consider the Audience. Look beyond the conclusions and examine the data! Look beyond the conclusions and examine the data! How does it apply to you? How does it apply to you? Is an Action necessary? Is an Action necessary? – Are procedural or policy changes needed? 5

6. Copyright © Texas Education Agency, 2012. All rights reserved. Cynics Look at Sample Size and Selection Sample Size and Selection Gathering Methodologies Gathering Methodologies Analysis Methodologies Analysis Methodologies Incomplete Data Picture Incomplete Data Picture Misleading Conclusions Misleading Conclusions 6

7. Copyright © Texas Education Agency, 2012. All rights reserved. Assessment Ratios Profitability Ratios measure the profitability of the organization. Profitability Ratios measure the profitability of the organization. – Gross profit margin – Operating profit margin – Net profit margin – Return on assets (ROA) – Return on equity (ROE) 7

8. Copyright © Texas Education Agency, 2012. All rights reserved. Assessment Ratios Liquidity Ratios measure the organizations ability to meet short-term obligations. Liquidity Ratios measure the organizations ability to meet short-term obligations. – Current ratio – Quick ratio 8

9. Copyright © Texas Education Agency, 2012. All rights reserved. Assessment Ratios Debt Ratios measure the amount of debt an organization is using and the ability of the organization to pay off the debt. Debt Ratios measure the amount of debt an organization is using and the ability of the organization to pay off the debt. – Total assets ratio – Times interest earned ratio 9

10. Copyright © Texas Education Agency, 2012. All rights reserved. Assessment Ratios Asset Activity Ratios measure how efficiently the company is using its assets. Asset Activity Ratios measure how efficiently the company is using its assets. – Average collection period ratio, – Inventory turnover ratio, and – Total asset turnover ratio. 10