Question 1

To compute a government's debt burden,which of the following is the most appropriate denominator?

Accepted Answer

A)  current liabilities
B)  accounts receivable
C)  full value of taxable real property
D)  pension benefits paid in the preceding year C

Question 2

(Computation of a governmental entity's debt and debt service burdens)
The following data is extracted from the general and debt service columns of the Town of Gold Hill's governmental funds statement of revenues,expenditures,and changes in fund balances for the year ended December 31,2013.(Interfund transfers were eliminated in aggregating data. ) $\begin{array}{lr}\text { Total revenues }&\$ 210.5 \text { million }\\text { Expenditures: }\
\text { Public safety } & 45.3 \text { million } \
\text { Public health } & 22.3 \text { million } \
\text { Economic assistance } & 80.4 \text { million } \
\text { All other expenditures } & 50.7 \text { million } \
\text { Debt principal } & 6.2 \text { million } \
\text { Interest on debt } & 4.8 \text { million } \
\text { Total expenditures } & 209.7 \text { million } \
\text { Excess of revenues over expenditures } & \$ .8 \text { million }
\end{array}$ 
The governmental activities column of the Town of Gold Hill's statement of net assets shows general obligation bonds payable of $96,900,000.The statistical tables in the Town's comprehensive annual financial report shows that its population is 230,600 and that the full value of its taxable real property for 2013 is $6,737,000,000.
Required: 
a.Compute the Town of Gold Hill's debt service burden.
b.Compute the Town of Gold Hill's debt burden,using per capita debt and debt as a percentage of the full value of taxable real property.
c.Assess these burdens in light of the following data for a reference group of municipalities within the same state as the Town of Gold Hill: debt service burden - 4.6%;debt per capita - $370;debt as a percent of full value of taxable real property - 1.02%.

Accepted Answer

a.Debt service burden = Debt service / Revenues = $ 11.0 million / $210.5 million = 5.2%
b.Debt burden:
Per capita burden = $96,900,000 (debt)/ 230,600 (population)= $420 per capita
Debt as percent of full value of taxable property = $96,900,000 (debt)/ $6,737,000,000 = 1.44%
c.Assessment: The Town of Gold Hill's debt service burden of 5.2% is greater than the reference group.Gold Hill's debt burden,using both measures,is also greater than the reference group.To get a better assessment of this burden,it would be useful to see how rapidly Gold Hill is amortizing its debt principal.

Question 3

This statement of facts is presented for problems 12 and 13: A hospital's trial balance shows the following captions: (1)cash equivalents; (2)prepaid insurance on buildings; (3)inventory of medicines; (4)short-term investments; (5)accumulated depreciation on buildings; (6)current portion of long-term debt;and (7)accounts receivable.
-Which of these seven accounts do not enter into the calculation of the quick ratio?

Accepted Answer

A)  (3) , (5) ,and (6) 
B)  (2) , (5) ,and (7) 
C)  (2) , (3) ,and (5) 
D)  (3) , (5) ,and (7)  C

Question 4

SEQ CHAPTER \h \r 1This statement of facts is presented for problems 22 and 23: The following data comes from Olde Towne Hospital's financial statements.Total revenues were $20 million.Total expenses were $18 million,consisting of patient care expenses - $13 million;administrative expenses - $2 million;depreciation - $2 million;and interest on long-term debt - $1 million.Principal payments on long-term debt were $1.5 million.
-What is Olde Towne's debt service coverage?

Accepted Answer

A)  0.8 times
B)  1.6 times
C)  2.0 times
D)  2.7 times

Question 5

What can an analyst learn from the liquidity indicators?

Accepted Answer

A)  the amount of cash than an entity can obtain from liquidating its capital assets
B)  the amount of cash needed to liquidate its long-term debt
C)  the amount that an entity is likely to realize from selling all of its assets
D)  the ability of an entity to meet its short-term obligations

Question 6

This statement of facts is presented for problems 12 and 13: A hospital's trial balance shows the following captions: (1)cash equivalents; (2)prepaid insurance on buildings; (3)inventory of medicines; (4)short-term investments; (5)accumulated depreciation on buildings; (6)current portion of long-term debt;and (7)accounts receivable.
-Which of these seven accounts do not enter into the calculation of the current ratio?

Accepted Answer

A)  only (5) 
B)  only (6) 
C)  only (7) 
D)  (5) and (7)

Question 7

Which of the following factors is the most important consideration about the organizations that comprise a reference group for financial analysis purposes?

Accepted Answer

A)  they should have approximately the same administrative structure as the entity studied
B)  they should be located in the same section of the country as the entity studied
C)  they should perform the same functions and be about the same size as the entity studied
D)  they should have approximately the same fiscal year as the entity studied

Question 8

What can a financial analyst learn from computing a hospital's debt service coverage?

Accepted Answer

A)  the number of times the debt service is covered by the hospital's earnings
B)  the excess of the total net assets over the hospital's outstanding long-term debt
C)  the number of times the debt service is covered by the hospital's current assets
D)  the ratio of the outstanding long-term debt to the current year's debt service

Question 9

The most important reason for being concerned with a municipality's available fund balance as a percentage of its revenues and certain transfers in is that the ratio provides a good measure of:

Accepted Answer

A)  the liquidity of its resources
B)  the volatility of its revenue structure
C)  its ability to weather future revenue shortfalls
D)  its efficiency and effectiveness

Question 10

What information could a financial analyst potentially obtain by reviewing the statement of activities?

Accepted Answer

A)  whether the resources obtained during the year were sufficient to cover the cost of providing services
B)  whether services provided were sufficient for the government's constituencies
C)  the current financial condition of a government
D)  the current status of a government's assets and liabilities

Question 11

Why do financial analysts prepare common size financial statements?

Accepted Answer

A)  it is easier to work with financial statements when they are all in the same format
B)  they help the analyst identify changes over time in the proportion that each item of expense bears to the entity's total expenses
C)  they are a necessary first step in allowing the analyst to develop per capita information
D)  they show the dollar amount of change from one year to another for each item of expense,both for the entity studied and the reference group.

Question 12

You are assessing the financial condition of a county.Its financial statements have captions for "transfers in" and "transfers out," both containing significant amounts.What consideration should you give to these transfers in assessing financial condition?

Accepted Answer

A)  do not consider them in your analysis,because transfers in will equal transfers out
B)  see if transfers in equal transfers out.Then,check the balance sheet to see if the captions "due to" and "due from" also are equal.If so,no further review is needed
C)  see if the transfers are recurring,rather than one-shots.If they are recurring,no further inquiry is needed
D)  only transfers in should be considered

Question 13

The following information comes from a hospital's financial statements: Net patient accounts receivable - $3.5 million;Gross patient service revenues - $15 million;Contractual adjustments - $3 million;and Charity care - $1 million.What is the hospital's number of days' revenue in patient accounts receivable (rounded to nearest whole day)?

Accepted Answer

A)  85
B)  106
C)  116
D)  1147

Question 14

SEQ CHAPTER \h \r 1This statement of facts is presented for problems 22 and 23: The following data comes from Olde Towne Hospital's financial statements.Total revenues were $20 million.Total expenses were $18 million,consisting of patient care expenses - $13 million;administrative expenses - $2 million;depreciation - $2 million;and interest on long-term debt - $1 million.Principal payments on long-term debt were $1.5 million.
-What is Olde Towne's interest coverage?

Accepted Answer

A)  2.0 times
B)  3.0 times
C)  4.0 times
D)  5.0 times

Question 15

You are calculating the quick ratio for the General Fund.The General Fund balance sheet contains the following captions: (1)cash; (2)cash equivalents; (3)taxes receivable; (4)inventory; (5)prepaid items;and (6)due from other funds.Which of these accounts will enter into the calculation?

Accepted Answer

A)  (1) and (2) 
B)  (1) , (2) ,and (3) 
C)  (1) , (2) , (3) ,and (6) 
D)  all six

Question 16

At December 31,2013,Yorktown's pension fund had net assets available for benefits of $12 million.Its actuarial accrued liability at that time was $16 million.For the year ended December 31,2013,its pension fund had paid $3 million in pension benefits.Yorktown's salaries for the year were $18 million.What was Yorktown's funded ratio?

Accepted Answer

A)  67%
B)  75%
C)  89%
D)  400%

Question 17

To obtain a frame of reference for assessing financial trends of a particular city,you decide to compare them with financial trends of other municipalities.Which approach will provide the most appropriate reference group for this purpose?

Accepted Answer

A)  a statistical sample of all municipalities (cities,counties,villages,etc. ) in the country
B)  a statistical sample of all municipalities (cities,counties,villages,etc. ) in the same state
C)  a random sample of municipal governments,other than cities,in the same state
D)  a sample of cities of roughly similar population size and that perform similar functions in the same state

Question 18

What can a financial analyst learn from a hospital's number of days' revenue in receivables?

Accepted Answer

A)  the hospital's accounts receivable collection efficiency
B)  the average length of stay of patients in the hospital
C)  the average daily occupancy rate of the hospital's beds
D)  the proportion of hospital beds occupied by patients covered by self-pay patients

Question 19

A not-for-profit entity had revenues,gains,and other support of $18 million;program expenses of $12 million;and administrative and fund raising expenses of $4 million.What was the entity's program services ratio?

Accepted Answer

A)  11%
B)  67%
C)  75%
D)  300%

Question 20

Which of the following items should be excluded from the assets or liabilities when computing the quick ratio?

Accepted Answer

A)  inventories
B)  amount of long-term debt due in the following year
C)  accounts payable
D)  cash equivalents

Exam 14: Analysis of Financial Statements and Financial Condition