CMC Financial Administration & Budgets 4

Question 1

Which financial policy ratio is commonly used to measure a government's ability to cover short-term obligations using liquid assets?

Accepted Answer

Current ratio

Answer

The current ratio (current assets ÷ current liabilities) measures short-term liquidity and is a key indicator of a government's ability to meet near-term obligations.

Question 2

A city council wants to spend $2M on a new park not included in the adopted budget. What action is required?

Accepted Answer

A formal budget amendment or supplemental appropriation ordinance must be passed

Answer

Spending outside adopted appropriations requires a formal amendment or supplemental appropriation approved by the governing body to maintain legal compliance.

Question 3

Revenue bonds differ from general obligation bonds primarily because they:

Accepted Answer

Are repaid only from revenues of the specific project they finance

Answer

Revenue bonds are secured solely by revenues from the financed project (e.g., a toll road or utility), not by the government's taxing power.

Question 4

Under GASB 54, which fund balance classification represents amounts constrained by external parties such as creditors or grant grantors?

Accepted Answer

Restricted

Answer

GASB 54 defines 'restricted' fund balance as amounts constrained by externally imposed requirements from creditors, grantors, contributors, or law.

Question 5

What is the primary purpose of a Comprehensive Annual Financial Report (CAFR/ACFR)?

Accepted Answer

To provide a complete audited picture of a government's financial position

Answer

The CAFR (now ACFR) is the official annual financial report containing audited financial statements that provide a complete view of a government's finances.

(CMC) Certified Municipal Clerk Practice Test

(CMC) Certified Municipal Clerk Practice Test

CMC Financial Administration & Budgets 4