For the economic wellbeing of a country, it is crucial to carry out financial analysis at the end of each fiscal year. Data from various years can be compared in order to evaluate the economic and financial position of the country.
In general, the financial position of a country can be measured using parameters such as income tax, revenue or consumers’ purchasing power. These parameters and variations within the fiscal years can give adequate data that can be used to declare the financial status of an economic entity.
Data can be collected from a sample town and assumed as fair sample for a country. In this article, Swobodaville has been taken as the hypothetical sample town and a subject of the analysis.
In Swobodaville, it is clear that the revenue per household is constant. It falls slightly in the second financial year, rises in the third year and then remains constant for the next 3 years of the analysis.
Additionally, the sales tax as a percentage of the total revenue experiences a constant drop as the expenditures per household rise. This shows that the growing population has a reduced purchasing power, which is an evidence of a retarding economy (Carroll, 2009).
Moreover, the data show that the sales tax-exempt households as a percentage of the population increases progressively with time, while the number of low-income earners is on the rise.
According to the data, the economic position of the town is deteriorating with each fiscal year. The increase in expenditure despite a constant revenue is a clear evidence that resources are diverted towards other non- profit able activities. Therefore, limited resources are overwhelmed by the constantly increasing population.
A decrease in resources implies that there is low employment rate, and higher number of low-income earners. Therefore, this reduces the number of individuals paying tax to the government because significant taxpayers are the few employed individuals.
Another factor contributing to a poor economy is the unproductive public, which concentrates on non-profitable activities; thus making their revenue to decrease (Carroll, 2009).
In this society, the public should dedicate their revenue to income generating activities in order curb the existing economic crisis in this town. This would ensure that the available resources are multiplied to cater for the growing population. Another possibility would be to implement new management policies.
For example, it would be worth reducing the tax burden from the income earners to enable them invest significant part of their savings (Thorndike, 2002). In addition, the government should fund small-scale entrepreneurs to uplift their business capital, hence maximize their profits.
This would open up employment opportunities to the public. In this economy, it would also be necessary for the government to diversify their sources of income. This is essential to avoid over dependence on external sources of income such as loans and grants.
To achieve this, they need to start income generating projects such as industries and intensive agriculture. These strategies should be implemented wisely, and in an order of priority.
In conclusion, the economic situation of a country should be evaluated periodically in order to establish its financial position at any given period. This is to ensure that any crisis is mitigated in time.
Such a correction would involve amendment of financial policies; focus on development and enlightenment of the citizens. This would ensure a sustained growth of the economy and hence a firm financial foundation.
References
Carroll, D. (2009). Diversifying municipal government revenue structures. New York: John Wiley & sons.
Thorndike, J. (2002). Tax justice: the ongoing debate. Washington: The urban institute press.