A city decides to invest in a new piece of equipment and wants to know how long it will take to
recover the amount invested by using the payback analysis technique. The city uses the following
assumptions in its analysis:
The cost of the equipment is $500,000.
The equipment will generate $200,000 in revenue per year.
The variable costs of operating the equipment will be $100,000 per year.
The depreciation on the equipment will be $20,000 per year.
How long will it take the city to recover the amount invested in the new equipment?
A.
2 years and 6 months
B.
2 years and 9 months
C.
Syears
D.
6 years and 3 months
Correct Answer: C
Explanation not available for this question.
Question #2 (Topic: demo questions)
The value, in current dollars, of a sum of money to be received in the future describes
A.
payback value.
B.
present value.
C.
annuity value.
Correct Answer: B
Explanation not available for this question.
Question #3 (Topic: demo questions)
Performance measurement assists management in
A.
Identifying weaknesses in disaster response preparedness.
B.
B. tracking actual results against targets.
C.
determining allocation of capital appropriations.
D.
monitoring performance of certified professionals in regulatory fields.
Correct Answer: B
Explanation not available for this question.
Question #4 (Topic: demo questions)
The ratios used to determine an organization's ability to meet its creditor's demands are
A.
udgetary cushion ratios.
B.
liquidity ratios.
C.
debt burden ratios.
D.
turnover ratios.
Correct Answer: B
Explanation:
• What Are Liquidity Ratios?Liquidity ratios are financial metrics used to measure an organization’s ability to meet its short-term
financial obligations as they come due. These ratios assess whether the organization has sufficient
liquid assets (like cash, receivables, or short-term investments) to cover its current liabilities (debts
or obligations due within a year).
• Why Are They Relevant to Creditors?
Creditors care deeply about an entity's ability to repay its debts in a timely manner. Liquidity ratios
provide a snapshot of the organization's financial health and give insight into its capacity to meet
short-term demands. They are essential tools in evaluating whether a government entity (federal,
state, or local) or any other organization can pay its creditors without needing to secure additional
financing or liquidate long-term assets.
• Common Liquidity Ratios:
The most commonly used liquidity ratios are:
Current Ratio: This measures the organization’s ability to pay off its current liabilities with current
assets.
Question #5 (Topic: demo questions)
Based on the data below, what can be concluded about outsourcing print job?
A.
It is better to keep the printing in-house.
B.
Outsourcing printing is feasible.
C.
Outsourcing printing is necessary.
D.
ABC Printing should be awarded the outsourcing contract.
Correct Answer: B
Explanation:
Understanding the Scenario: The table compares the costs of four printing jobs performed by an "Internal Print Shop" versus three
external vendors (Ace Printing, ABC Printing, and Printing, Inc.). Each vendor's pricing varies by print
job type. The task is to evaluate whether outsourcing (hiring external vendors) is a reasonable
alternative to keeping the work in-house.
Key Considerations in Outsourcing:
According to governmental accounting principles and budgeting practices outlined by the
Association of Government Accountants (AGA), the decision to outsource should consider:
Cost-effectiveness: Does outsourcing reduce costs without compromising quality or service delivery?
Operational efficiency: Can outsourcing free up internal resources for other priorities?
Comparative pricing: How do external vendor rates compare to internal costs for identical services?
Analysis of the Print Jobs:
Let’s break down the cost comparison for each print job:
Zone Map:
Internal cost = $4.23.
Cheapest vendor = Printing, Inc., at $4.00.
Outsourcing is cheaper for this job.
Agenda Packet:
Internal cost = $23.18.
Cheapest vendor = Printing, Inc., at $22.00.
Outsourcing is cheaper for this job.
Budget Cover:
Internal cost = $840.00.
Cheapest vendor = ABC Printing, at $624.30.
Outsourcing is significantly cheaper for this job.
Employee Benefit Brochure:
Internal cost = $6.14.
Cheapest vendor = ABC Printing, at $4.90.