Acct365 Ch10

20 Questions | Total Attempts: 348

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Acct365 Ch10

Questions and Answers
  • 1. 
    Which of the following groups or parties generally has taken the most initiative to evaluate the financial condition of a city?
    • A. 

      Citizens

    • B. 

      Managers

    • C. 

      Credit market analysts

    • D. 

      Legislative and oversight bodies

  • 2. 
    Which oof the following terms or concepts focuses primarily on a government's ability to generate enough cash over a 30- or 60- day period ti pay bills?
    • A. 

      Interperiod equity

    • B. 

      Financial condition

    • C. 

      Budgetary solvency

    • D. 

      Cash solvency

  • 3. 
    Which of the following environmental factors reveals the entity's underlying philosophies regarding willingness to support higher taxes, issuances of long-term debt, and increased social services?
    • A. 

      Political culture

    • B. 

      Community needs and resources

    • C. 

      External economic conditions

    • D. 

      Management practices and legislative policies

  • 4. 
    The group of factors that largely determines how fiscal policy is influenced by environmental factors is:
    • A. 

      Natural disasters and emergencies

    • B. 

      Unfunded liabilities

    • C. 

      External economic conditions

    • D. 

      Management practices and legislative policies

  • 5. 
    Which of the following would be an effective means of benchmarking?
    • A. 

      Comparing the city's key ratios to those of special purpose governments in the area.

    • B. 

      Comparing current-period ratios to published medians of the same ratios for cities of similar size or in the same geographic region.

    • C. 

      Comparing key ratios to published medians of the same ratios for larger cities in other parts of the country.

    • D. 

      Comparing current-period ratios to estimates for future periods.

  • 6. 
    Which of the following conditions could signal impending fiscal stress?
    • A. 

      Decreasing unemployment

    • B. 

      Increasing property values

    • C. 

      Decreasing revenues relative to expenditures

    • D. 

      Decreasing levels of unfunded pension obligations and other post employment retirement benefits

  • 7. 
    Credit rating agencies such as Moody's, Standard & Poor's, and Fitch examine which of the following factors when assessing creditworthiness for purposes of rating tax-supported bonds?
    • A. 

      Economy, finances, management, service capacity

    • B. 

      Finances, management, service capacity, debt

    • C. 

      Management, service capacity, debt, education

    • D. 

      Demographics, finances, management, debt

  • 8. 
    Which of the following statements is correct regarding the relationship between financial condition and economic condition?
    • A. 

      As defined by GASB, economic, condition is a broader term that would include the concepts embedded in the term financial condition

    • B. 

      Financial condition as defined by the ICMA incorporates cash solvency, budgetary solvency, long-run solvency, and service-level solvency, making it broader than the term economic condition

    • C. 

      Financial condition and economic condition relate to the government's ability to meet its short-term obligations

    • D. 

      None of the above

  • 9. 
    Which of the following suggests a government that is relying primarily on revenues it directly controls?
    • A. 

      Property taxes, 20%; chargers for services, 70%; grants and contributions, 5%, investment income, 5%

    • B. 

      Property taxes, 20%; chargers for services, 60%; grants and contributions, 10%, investment income, 10%

    • C. 

      Property taxes, 40%; chargers for services, 40%; grants and contributions, 10%, investment income, 10%

    • D. 

      Property taxes, 60%; chargers for services, 5%; grants and contributions, 30%, investment income, 5%

  • 10. 
    Which of the following best defines fiscal capacity?
    • A. 

      The probability that a government will meet its financial obligations and sustain services in the future

    • B. 

      The ability and willingness of the government to meet its obligations when they are due

    • C. 

      The government's ability and willingness to provide services

    • D. 

      Current assets are sufficient to pay current liabilites

  • 11. 
    The term that is defined as determining whether current-year revenues are sufficient to pay for the services provided that year and whether future taxpayers will be required to assume burdens for services previously provided is:
    • A. 

      Financial position

    • B. 

      Interperiod equity

    • C. 

      Financial condition

    • D. 

      Economic condition

  • 12. 
    The term that is closely related to the concept of liquidity is:
    • A. 

      Financial position

    • B. 

      Interperiod equity

    • C. 

      Financial condtion

    • D. 

      Economic condition

  • 13. 
    Which of the following trends is most likely to be a signal of impending fiscal stress?
    • A. 

      An increasing ratio of own source revenues to total revenues.

    • B. 

      A decreasing ratio of total revenues to total expenditures.

    • C. 

      A decreasing ratio of debt service expenditures to operating revenues.

    • D. 

      A decreasing ratio of operating expenditures to total revenues.

  • 14. 
    One of the most important reasons to evaluate the financial performance of a government is to:
    • A. 

      Determine if property taxes and other revenue sources should be increased.

    • B. 

      Assign responsibility for success or failure of the government to certain parties.

    • C. 

      Determine whether the government is accomplishing its mission.

    • D. 

      Have an early warning of impending financial difficulty for a diverse set of decision makers.

  • 15. 
     A term that describes a government's ongoing ability and willingness to raise revenues, incur debt, and meet its financial obligations
    • A. 

      Financial condition.

    • B. 

      Fiscal capacity.

    • C. 

      Economic condition.

    • D. 

      Financial position.

  • 16. 
    Which of the following is not a typical reason why people evaluate a government's financial condition?
    • A. 

       Prevent financial crises from developing.

    • B. 

      Hold management accountable for the use of tax revenues.

    • C. 

      Determine if the government can continue to offer the current level of services.

    • D. 

      Determine whether residents will receive dividends.

  • 17. 
    The key cause of municipal financial crises is the failure of management to raise taxes quickly enough in response to adverse environmental factors.
    • A. 

      True

    • B. 

      False

  • 18. 
     A tax watchdog group is an example of an intermediary that represents citizen interests.
    • A. 

      True

    • B. 

      False

  • 19. 
    The term financial position is closely related to the term liquidity while financial condition is much broader in scope, including not only financial position but also consideration of long-term solvency.
    • A. 

      True

    • B. 

      False

  • 20. 
    Cash solvency is the government's long-run ability to pay all the costs of doing business.
    • A. 

      True

    • B. 

      False

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