Which of the following trends is most likely to be a signal of impending fiscal stress?
A) An increasing ratio of own source revenues to total revenues.
B) A decreasing ratio of total revenues to total expenditures.
C) A decreasing ratio of debt service expenditures to operating revenues.
D) A decreasing ratio of operating expenditures to total revenues.

Question

Quizplus · Accepted Answer

A decreasing ratio of total revenues to total expenditures indicates that a government is spending more money than it is taking in, which is a clear signal of impending fiscal stress. Option A is not indicative of fiscal stress, as a higher ratio of own source revenues to total revenues indicates an ability to generate revenue internally, which can help mitigate fiscal stress. Option C is not indicative of fiscal stress either, as a decreasing ratio of debt service expenditures to operating revenues indicates that a government is spending less on debt service relative to its operating revenues, which is a positive sign. Option D may be indicative of fiscal stress, but it is not as strong an indicator as option B as it does not take into account total revenues and only considers operating expenditures.

Which of the Following Trends Is Most Likely to Be