ACE Airport Financial Management 5

Question 1

Which financial risk arises when an airport's revenues are heavily concentrated in a single airline that subsequently reduces service?

Accepted Answer

Concentration risk

Answer

Concentration risk occurs when dependence on a dominant carrier exposes the airport to severe revenue loss if that carrier reduces operations.

Question 2

What does 'defeasance' mean in the context of airport bond financing?

Accepted Answer

Setting aside sufficient funds in escrow to retire outstanding bonds

Answer

Defeasance involves depositing securities into an irrevocable escrow trust sufficient to meet all future bond payments, effectively retiring the debt.

Question 3

An airport uses 'activity-based costing' (ABC) primarily to:

Accepted Answer

Assign indirect costs more accurately to specific services or cost centers

Answer

ABC traces overhead costs to the activities that drive them, enabling more accurate cost allocation to services and facilities.

Question 4

Which ratio measures an airport's short-term ability to pay its current obligations using its most liquid assets?

Accepted Answer

Current ratio

Answer

The current ratio (current assets ÷ current liabilities) measures short-term liquidity and ability to meet near-term obligations.

Question 5

FAA Order 5100.38 provides guidance on which airport financial management topic?

Accepted Answer

Airport Improvement Program (AIP) handbook procedures

Answer

FAA Order 5100.38 is the AIP Handbook that governs grant application procedures, eligibility, and program management.

(ACE) Airport Certified Employee Practice Test

(ACE) Airport Certified Employee Practice Test

ACE Airport Financial Management 5