Certified Government Financial Manager (CGFM) Practice Exam 2025 – Your All-in-One Guide to Exam Success!

The choice indicating a high debt burden according to rating agencies is characterized by the ratio of outstanding long-term debt (LTD) to assessed property values being in the range of 15-20% and above. Rating agencies assess an entity's financial health using various key metrics, and a higher percentage of LTD in relation to property values signals that a significant portion of the resources is tied up in debt. This can indicate risk, as it suggests that a larger share of the entity's financial obligations may strain operational budgets and limit financial flexibility.

When long-term debt rises above a certain threshold in relation to property values, it reflects the potential difficulty of meeting debt obligations, particularly if the value of those properties were to decline or if the revenue generated from them does not keep pace with the debt service requirements. Consequently, a rating agency would view this scenario as a warning sign of possible financial distress, warranting closer scrutiny of the entity’s financial practices and overall economic stability.

Other answers reflect different metrics that do not necessarily indicate a high debt burden. For example, the percentage of operating costs to revenues or the allocation of annual revenue to debt service can illustrate various aspects of financial management but do not directly correlate to the burden of debt in relation to property values.