AGA CGFM Exam - Topic 3 Question 69 Discussion

Actual exam question for AGA's CGFM exam

Question #: 69
Topic #: 3

The Parking Fund for a government entity has the following information in its Statement of Net Position. Calculate the current ratio.

Total current assets $1,320

Total non-current assets $8,100

Total assets $9,420

Total current liabilities $ 810

Total non-current liabilities $ 360

Total liabilities $1,170

Total net position $8,250

A0.61

B0.98

C1.14

D1.63

Show Suggested Answer

Suggested Answer: D

What Is the Current Ratio?

The current ratio measures an entity's ability to cover its short-term liabilities with its short-term assets. The formula is: CurrentRatio=TotalCurrentAssetsTotalCurrentLiabilitiestext{Current Ratio} = frac{text{Total Current Assets}}{text{Total Current Liabilities}}CurrentRatio=TotalCurrentLiabilitiesTotalCurrentAssets

Calculation:

Total Current Assets = $1,320

Total Current Liabilities = $810

CurrentRatio=1,320810text{Current Ratio} = frac{1,320}{810}CurrentRatio=8101,320 CurrentRatio1.63text{Current Ratio} 1.63CurrentRatio1.63

Why the Current Ratio Matters:

A current ratio above 1 indicates that the entity has more current assets than current liabilities, suggesting good short-term liquidity.

Why Other Options Are Incorrect:

A . 0.61, B. 0.98, C. 1.14: These values result from incorrect calculations or misinterpretations of the formula.

Reference and Documents:

GAO Financial Analysis Guide: Provides guidance on using the current ratio to assess liquidity.

GASB Financial Reporting Requirements: Highlights the importance of liquidity measures in government financial statements.

by Yoko at Apr 03, 2025, 02:04 PM

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Jade

7 months ago

Totally agree, 1.14 sounds more accurate!

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Nu

7 months ago

Wait, are we sure about those numbers? Seems off.

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Lashanda

7 months ago

Current ratio is calculated as current assets divided by current liabilities.

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Tracey

7 months ago

Nope, it's definitely not that high.

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Anjelica

7 months ago

I think it's 1.63, right?

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Veronika

8 months ago

I feel like I might be overthinking this. The current ratio should definitely be greater than 1 if the assets are sufficient, but I can’t remember the exact calculation steps.

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Vilma

8 months ago

I practiced a similar question last week, and I think the answer was around 1.14, but I’m not confident about the exact numbers here.

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Twila

8 months ago

I think the current ratio is just current assets divided by current liabilities, right? So it should be $1,320 divided by $810.

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Dalene

8 months ago

I remember we calculated the current ratio in class, but I’m not entirely sure if I should include non-current assets in this calculation.

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Emile

9 months ago

I think I've got it figured out. The current ratio is calculated as current assets divided by current liabilities. Based on the information given, the current ratio is 0.98. I'm confident in this answer.

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Carin

9 months ago

Wait, I'm not sure I'm following this correctly. Shouldn't we be looking at the total assets and total liabilities to calculate the current ratio? This seems too straightforward.

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Luisa

9 months ago

No problem, I've got this. The current assets are $1,320 and the current liabilities are $810, so the current ratio is 1.63. Easy peasy!

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Ira

9 months ago

Hmm, I'm a little confused. Where exactly are the current assets and liabilities in this information? I don't see them labeled as such.

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Elza

9 months ago

Okay, I've got this. The current ratio is just current assets divided by current liabilities, so I'll need to find those values from the data provided.

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Teddy

1 year ago

Hey, as long as they're not charging us an arm and a leg for parking, I'm good with it. Though I'm pretty sure the current ratio is still going to be higher than my parking ticket fees.

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Nobuko

1 year ago

Wait, wait, wait... you're telling me the government entity has a 'Parking Fund'? I didn't realize they also owned a multi-level garage downtown.

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Esteban

1 year ago

User 3: I think the current ratio is 1.14.

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Catherin

1 year ago

User 2: I know, right? I wonder how they manage that.

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Latonia

1 year ago

User 1: Yeah, it's interesting that they have a 'Parking Fund'.

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Shantay

1 year ago

What is this, a trick question? The current ratio should be A) 0.61. I know my accounting principles inside and out.

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Hassie

1 year ago

I'm not sure, but I think it might be C) 1.14. Can someone confirm?

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Loreen

1 year ago

No way, it has to be A) 0.61. That's the correct answer.

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Idella

1 year ago

I think the current ratio is actually B) 0.98.

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Curtis

1 year ago

Hold on, I'm getting a different result. I think the answer is D) 1.63. Time to break out the calculator and verify this.

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Louvenia

1 year ago

I agree with D) 1.63 after double-checking.

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Frederica

1 year ago

I calculated it as B) 0.98.

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Rashida

1 year ago

I think the answer is A) 0.61.

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Regenia

1 year ago

Based on the information given, the current ratio is 1.63, which is option D.

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Elenor

1 year ago

I agree, let's use the formula Current Ratio = Total Current Assets / Total Current Liabilities.

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Aileen

1 year ago

Hmm, I think B) 0.98 is the correct answer. The question is asking for the current ratio, and that seems to fit the numbers provided.

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Barrie

1 year ago

Great, B) 0.98 it is for the current ratio.

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Bernardo

1 year ago

Let's go with B) 0.98 then.

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Malissa

1 year ago

I think so too, the current assets and liabilities match up with that ratio.

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Jaleesa

1 year ago

I agree, B) 0.98 seems to be the right choice.

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Regenia

1 year ago

I think we need to calculate the current ratio for the Parking Fund.

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Krystina

1 year ago

The current ratio is definitely C) 1.14. I've double-checked the calculations and that's the only option that makes sense.

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Tresa

1 year ago

I'm positive it's C) 1.14. The numbers add up perfectly.

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Rochell

1 year ago

Are you sure about that? I think it might be D) 1.63.

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