Deck 15: Financial Analysis

Question 1

By law, governments are prohibited from outsourcing certain activities such as clerical operations, and repair and maintenance services.

Answer 1

False

Question 2

Which of the following is an example of an efficiency measure?

A)Cost per client placed in an appropriate job.
B)Cost per ton of garbage collected.
C)Cost per gallon of water suitable for drinking.
D)Cost per child reading at grade level.

Answer 2

B

Question 3

Budgets are generally on a cash or near-cash basis.

Answer 3

True

Question 4

Governmental budgets must adhere to GAAP.

Question 5

For many analytical purposes, revenues and expenditures are best expressed per capita.

Question 6

A government's economic condition is a broader concept than its financial position.

Question 7

A private mail and package delivery service boasts that it can deliver the same material as the government-run mail and package delivery service for a fraction of the cost of the government-run service.Which of the following is the best course of action for the government?

A)The government should contract-out all of its mail and package delivery service.
B)The government should develop laws and regulations limiting competition with government-run services.
C)The government should renegotiate their contract with the labor union.
D)The government should determine if costs incurred by the government-run service are negatively impacted by social policy decisions made by the legislative body.

Question 8

The city council of the City of Highland Hills has adopted a policy of aggressively pursuing grants and other resource inflows from other levels of government.Over the past several years, the proportion of total City revenues that comes from other levels of government has been steadily increasing.As a consequent of these increased revenues, the City has begun offering a number of new services to the citizens of the City.In assessing the financial condition of the City of Highland Hills, an analyst would conclude which of the following?

A)The increasing reliance on intergovernmental revenues has increased the financial viability of the City.
B)The increasing reliance on intergovernmental revenues is a negative fiscal characteristic.
C)The increasing reliance on intergovernmental revenues is irrelevant in assessing the financial condition of the City.
D)The increasing reliance on intergovernmental revenues is a sign of poor management on the part of the City Council.

Question 9

In the future, e-commerce will affect governments, just as it is now transforming businesses.

Question 10

Which of the following groups is least likely to be involved in evaluating the efficiency and effectiveness of government programs?

A)Accountants.
B)Legislators.
C)Economists.
D)Statisticians.

Question 11

A widely used rule of thumb holds that two consecutive years of operating deficits connote serious fiscal stress.

Question 12

For financial analysis purposes, nonfinancial considerations are at least as important as the financial statements.

Question 13

Accountants are actively involved in collecting and analyzing data to be used by public policy makers.Which of the following other groups might also be involved in the data collection and analysis process?

A)Statisticians.
B)Economists.
C)Program managers.
D)All of the above.

Question 14

Which of the following is generally considered to be a positive fiscal characteristic for a City?

A)A high, or increasing, ratio of intergovernmental revenues to total revenues.
B)A low percentage of restricted revenues to total revenues.
C)A high proportion of one-time revenues to total revenues.
D)A low ratio of property tax revenues to total revenues.

Question 15

For financial analysis purposes, the Comprehensive Annual Financial Report alone can provide all the information resource providers and other interested parties might need.

Question 16

Which of the following events would be evidence that the content criterion of a not-for-profit joint program and fund-raising activity had not been met? Each activity included both a program activity and a fund-raising solicitation.

A)A hospital sends a copy of the annual financial statement to all trustees, employees and previous donors.
B)Preserve the River mails information on the effects that dams on the river have to the river ecosystem.
C)American Heart Association sends information on heart healthy diets and encourages healthy lifestyles.
D)Citizens for Tax Credits, a not-for-profit entity supporting tax credits for families whose children attend private schools, conducts a mass mailing encouraging a letters to the editor letter-writing campaign.

Question 17

Which of the following would generally be considered to be an indication of future economic problems for a City?

A)A decreasing percentage of revenue raised by the City as a proportion of total appraised value of property.
B)A decreasing percentage of revenue raised by the City as a proportion of median family income.
C)An increasing population base.
D)An increasing industrial base in a variety of industries.

Question 18

Which of the following events would be evidence that the audience criterion of a not-for-profit joint program and fund-raising activity has NOT been met? Each activity included both a program activity and a fund-raising solicitation.

A)American Heart Association mailed pamphlets encouraging heart-healthy diets to all telephone subscribers in a geographic area.
B)Citizen Against Centennial Highway conducted a door-to-door campaign in the area of a proposed new Interstate highway asking citizens to writing to federal, state, and local elected officials expressing opposition to the proposed location.
C)Citizens For 1% (an initiative to limit property tax rates)conducts a mass mailing to all homeowners in the City.
D)Citizens for Term Limits, a not-for-profit group organized to push for term limits for all elected officials, conducts a mailing to encourage citizens to write their legislatures expressing support for term limits.The mailings went to all citizens with incomes greater than $50,000.

Question 19

Bond rating agencies usually require governments to supplement their CAFRs with additional documents, such as budgets, long-range forecasts and plans, and economic reports.

Question 20

Which of the following is generally considered to be a positive fiscal characteristic for a City?

A)An increasing amount of payroll costs.
B)An increasing amount of expenditures for specific functions.
C)An increasing percentage of nondiscretionary expenditures.
D)An increasing percentage of discretionary expenditures.

Question 21

A government's fiscal effort is the extent to which it is taking advantage of its

A)Taxpayers.
B)Governing bodies.
C)Fiscal capacity.
D)Employees.

Question 22

Which of the following statements is true regarding the ratio analysis of Nondiscretionary Expenditures to Total Expenditures?

A)The higher the percentage of nondiscretionary expenditures, the less flexibility the government has to reduce (or limit increases in)spending.
B)The higher the percentage of nondiscretionary expenditures, the more flexibility the government has to reduce (or limit increases in)spending.
C)The lower the percentage of nondiscretionary expenditures, the less flexibility the government has to reduce (or limit increases in)spending.
D)The higher the percentage of nondiscretionary expenditures, the less flexibility the government has to increase spending.

Question 23

Which of the following statements is true regarding the ratio analysis of Restricted Revenues to Total Operating Revenues?

A)Higher percentages of restricted revenues are preferred to low percentages.
B)Higher percentages of total operating revenues are preferred to low percentages.
C)Lower percentages of restricted revenues are preferred to high percentages.
D)Lower percentages of total operating revenues are preferred to high percentages.

Question 24

Which of the following statements is true regarding the ratio analysis of Property Tax Revenues to Total Operating Revenues?

A)Property taxes are considered a stable revenue source, and a high ratio or property tax revenues to other, less stable, revenues is a negative attribute.
B)Property taxes are considered a stable revenue source, and a high ratio or property tax revenues to other, less stable, revenues is a positive attribute.
C)Property taxes are considered an unstable revenue source, and a high ratio or property tax revenues to other, more stable, revenues is a negative attribute.
D)Property taxes are considered an unstable revenue source, and a high ratio or property tax revenues to other, more stable, revenues is a positive attribute.

Question 25

A government's financial position is represented by

A)The status of its assets, liabilities, and net assets, as presented in its statement of net assets.
B)The status of its revenues and expenses, as presented in its statement of activities.
C)Both (a)and (b).
D)Neither (a)nor (b).

Question 26

A government's economic condition is a(n)____________ concept than its financial position.

A)Easier.
B)Broader.
C)Narrower.
D)Equal to.

Question 27

Which of the following statements is true regarding the formula most often used by governments for the liquidity ratio?

A)Cash divided by current liabilities.
B)Receivables divided by current liabilities.
C)Receivables divided by payables.
D)Cash, short-term investments, and receivables divided by current liabilities. PROBLEMS (CHAPTER 15)

Question 28

In performing a financial analysis of a city, the financial analyst

A)Needs only the financial statements.
B)Must combine financial statement information with financial information from other sources.
C)Must combine financial statement information with both financial and nonfinancial information from other sources.
D)Needs only nonfinancial information from other sources.

Question 29

Which of the following statements is true regarding the ratio analysis of Intergovernmental Revenues to Total Revenues?

A)A high, or, increasing, ratio of intergovernmental revenues to total revenues is a sign of risk and is generally considered a positive fiscal characteristic.
B)A low, or, decreasing, ratio of intergovernmental revenues to total revenues is a sign of risk and is generally considered a negative fiscal characteristic.
C)A low, or, increasing, ratio of intergovernmental revenues to total revenues is a sign of risk and is generally considered a negative fiscal characteristic.
D)A high, or, increasing, ratio of intergovernmental revenues to total revenues is a sign of risk and is generally considered a negative fiscal characteristic.

Question 30

If an activity that involves fund-raising as well as programmatic, management, or general functions meets one of the three broad criteria then all expenses of the joint activity must be

A)Charged to fund-raising.
B)Charged to programmatic.
C)Charged to management and general.
D)Allocated between fund-raising and either programmatic or management and general.