Which ratio expresses a government's overall debt burden in the CAFR?

Prepare for the CPFO Accounting Test. Study with multiple choice questions, each with hints and explanations. Set yourself up for success!

The correct answer reflects the importance of both ratios in assessing a government's overall debt burden as presented in the Comprehensive Annual Financial Report (CAFR).

The first ratio, total outstanding debt to personal income, provides insight into how much debt a government has in relation to the income of its residents. This measurement illustrates the capacity of the population to manage and support the governmental debt, implying the potential burden on taxpayers if the government needs to raise funds to service this debt.

The second ratio, total debt per capita, gives a straightforward figure of how much debt exists for each individual within the jurisdiction. This measure is particularly useful for understanding the average debt load attributable to each citizen, thereby contextualizing the debt burden on a personal level.

Both ratios serve valuable purposes: the first in the context of income capacity and economic health of the jurisdiction, and the second in considering the individual impact on citizens. Thus, either ratio can effectively indicate the degree of financial obligation a government possesses.

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