Exam 10: Analysis of Government Financial Performance

For each of the following financial ratios that are based on comprehensive annual financial report (CAFR) information by selecting the appropriate letter of the explanation for that ratio. Answers can only be used once. A. An indicator of interperiod equity. B. An indicator of the government's commitment to replacement of capital assets. C. An indicator of the government's reliance on revenues it does not directly control. D. A measure of the degree to which government assets have been funded with debt. E. An indicator of the government's ability to pay its 60- to 90-day obligations. F. A measure of the government's capacity to issue debt. G. A measure of capital asset useful service life. H. A measure of the government's liquidity. I. An indicator of taxpayer debt burden. J. An indicator of the government's ability to withstand financial emergencies. ________ 1. General fund balances/General Fund operating revenues ________ 2. (Cash + short-term investments)/Current liabilities ________ 3. General obligation long-term debt/Assessed valuation ________ 4. Capital outlay from operating funds/Operating expenditures ________ 5. General bonded debt/Legal debt limit ________ 6. Accumulated depreciation/Average cost of depreciable assets ________ 7. Net revenues/Total expenses ________ 8. Charges for services/Total revenues ________ 9. Total liabilities/Total assets ________ 10. Current assets/Current liabilities

Which of the following governments would have publicly accessible information available through the Electronic Municipal Market Access (EMMA)?

Use of trend data is an acceptable method of benchmarking for governments.

Cash solvency is the government's long-run ability to pay all the costs of doing business.

How do the objectives of evaluating financial condition differ between internal managers and credit analysts? How are their objectives similar?

Describe some ratios that can be calculated using the basic financial statements that will help a decision maker assess the financial position of the government.

According to the GASB, which of the following financial concepts can be defined as the probability that a government will meet its financial obligations, both currently and in the future?

All of the following are appropriate benchmarks for a state or local government to use as a basis for comparing performance except:

Three major rating agencies (Fitch, Moody's, and Standard and Poor's) for governments have each developed quantitative tools for assessing credit risk. Which of the following general factors is used by all three rating agencies in assessing credit risk?

Electronic Municipal Market Access (EMMA) is an electronic database of government financial reports provided by the Securities and Exchange Commission.

The term financial position is closely related to the term liquidity.

After financial ratios are calculated, the results should be compared to any of the following except:

Population demographics have an impact on financial factors such as revenue per capita.

Which of the following ratios would be most helpful in assessing the operating position of a government entity?

An investor could find all but one of the following pieces of information through the Electronic Municipal Market Access (EMMA). Which of the following is not available on EMMA?

A measure of the adequacy of the amount of the government's total unrestricted net position or deficit at the measurement date is:

Budget solvency is the government's ability to provide services at the level and quality that are required for the health, safety, and welfare of its citizens.

Select the key term that relate to analysis of government financial performance from the list that best matches with the following definition. A. Benchmarking B. Budgetary solvency C. Cash solvency D. Economic condition E. Financial condition F. Financial position G. Fiscal capacity H. Long-run solvency I. Service capacity J. Service-level solvency ________ 1. The probability that a government will meet its financial obligations as they become due and its service obligations to constituencies ________ 2. A composite of a government's financial health and its ability and willingness to meet its financial obligations and its commitments to provide services ________ 3. The method of identifying a number that represents a target to which actual results are compared, or a basis for comparison ________ 4. The government's ongoing ability and willingness to raise revenues, incur debt, and meet its financial obligations as they become due ________ 5. The adequacy of cash and short-term claims to cash to meet current obligations and those expected in the near future ________ 6. A government's ability to provide services at the level and quality that citizens desire ________ 7. A government's ability to generate enough cash over a 30- or 60-day period to pay its bills

Which of the following terms is defined as determining whether current-year revenues are sufficient to pay for current-year services and whether future taxpayers will be required to assume the burdens of services previously provided?

An effective system for evaluating financial performance helps management to assess whether financial performance can meet creditor and service obligations.