CPWM Financial Planning & Budgeting 2

Question 1

Which budgeting approach builds each budget cycle from zero rather than using prior-year actuals as a baseline?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting requires every expenditure to be justified anew each cycle, eliminating the assumption that prior-year spending levels are appropriate.

Question 2

A public works department wants to recover the full cost of a service from users who directly benefit. This practice is called:

Accepted Answer

Full-cost pricing

Answer

Full-cost pricing ensures that user fees cover all direct and indirect costs, including overhead, depreciation, and debt service associated with providing the service.

Question 3

When a local government issues general obligation bonds to fund infrastructure, repayment is typically secured by:

Accepted Answer

The full faith and credit (taxing power) of the government

Answer

General obligation bonds pledge the issuer's unlimited taxing authority as security, making them lower-risk than revenue bonds.

Question 4

Which financial ratio best measures a government's ability to pay current obligations from current assets?

Accepted Answer

Current ratio

Answer

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

Question 5

Under GASB standards, an enterprise fund is used to account for activities that are:

Accepted Answer

Operated in a manner similar to private business

Answer

Enterprise funds apply accrual accounting to government activities that charge fees to external users, similar to how a private business operates.

(CPWM) Certified Public Works Manager Practice Test

(CPWM) Certified Public Works Manager Practice Test

CPWM Financial Planning & Budgeting 2