What is the purpose of debt coverage analysis?

The purpose of debt coverage analysis is to ensure that the debt being issued is affordable, which is crucial for maintaining the financial health of a municipality. This analysis involves evaluating the ability of the municipality to generate sufficient revenues to cover its debt service obligations, which means the revenue available must exceed the debt payments. A strong debt coverage ratio indicates that the municipality can comfortably manage its debt without jeopardizing its financial stability.

While other options touch on important aspects of municipal finance, they do not encapsulate the primary focus of debt coverage analysis. Forecasting revenues is indeed important, but it relates more to overall financial planning than directly assessing the affordability of specific debt. Stakeholder transparency plays a role in public finance management but is not the main objective of debt coverage analysis. Additionally, calculating the current fund balance is a different financial metric that does not directly address the municipality's ability to service debt. Hence, the emphasis of debt coverage analysis firmly aligns with ensuring debt affordability.