Which of the following ratios is a good measure of the liquidity of a city's resources?
A)cash and investments divided by current liabilities
B)fund balance as a percentage of revenues
C)debt service expenditures as a percentage of revenues
D)sales taxes as a percentage of total taxes

Question

Quizplus · Accepted Answer

The ratio of cash and investments divided by current liabilities is a good measure of liquidity as it indicates how easily the city can meet its short-term obligations. A high ratio indicates that the city has a strong liquidity position and can easily pay off its debts and obligations. Therefore, A is the best choice. B, C, and D are not good measures of liquidity. Fund balance as a percentage of revenues is a measure of the city's financial stability, debt service expenditures as a percentage of revenues reflect the city's debt burden, and sales taxes as a percentage of total taxes indicate the city's reliance on sales tax revenue.

Which of the Following Ratios Is a Good Measure of the Liquidity