Which of the following ratios indicates the ability of a government to support its debt?

Prepare for the GFOA Certified Public Finance Officer Exam with focused study materials and detailed multiple-choice questions. Maximize your learning opportunities and enhance your understanding of capital and operating budgeting.

The ratio that specifically indicates the ability of a government to support its debt is debt per capita. This metric provides insight into the amount of debt each individual in the population effectively carries, which is a significant factor in assessing the overall debt burden on the community. By analyzing this ratio, stakeholders can evaluate whether the government has the capacity to manage its existing and planned debt levels without overextending itself financially.

Debt per capita allows for a direct understanding of how well the government is positioned to meet its financial obligations relative to its population size. Lower levels of debt per capita often suggest healthy financial management and a greater ability to repay borrowed funds, making this an essential indicator of fiscal health and debt sustainability for governments.

In contrast, revenue growth rate, expenditure trends, and cash flow margin provide valuable information about different aspects of financial management but do not directly measure the burden of debt in relation to the population. Each of those aspects reflects operational and fiscal performance rather than focusing specifically on the relationship between debt levels and the government's ability to manage that debt over time. Therefore, while they contribute to the overall financial picture, they do not serve as direct indicators of debt support capacity like debt per capita does.

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