18
49) 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
50) 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
51) Explain the importance of evaluating government financial performance.
52) Distinguish and describe key financial performance concepts, such as financial position,
financial condition, and economic condition.
53) Explain the relationships among environmental factors, organizational factors, and financial
factors in determining government financial condition.
54) Describe how financial performance is related to the operating performance of a government
entity.
55) Discuss how despite significant improvements in the quality of government financial reporting
over the years there are still serious, high profile public sector financial crises. How does the
quality of financial reporting affect the ability to evaluate financial condition?
56) How do the objectives of evaluating financial condition differ between internal managers and
credit analysts? How are their objectives similar?
57) “Financial statements are virtually useless in evaluating a city’s financial condition.” Do you
agree with this statement? Why or why not?
58) How do credit analysts assist decision makers in evaluating the credit worthiness of a state or
local government?
59) “Benchmarking is a simple method for comparing one government to another.” Do you agree
or disagree with this statement? Explain.
60) 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.