If a State Constructs Its Budget by Making Small Adjustments

question 1

Multiple Choice

If a state constructs its budget by making small adjustments to the previous year's expenditures while avoiding a comprehensive review of requested funds, it is engaging in which type of budgeting?

• A) line-item budgeting
• B) performance budgeting
• C) incremental budgeting
• D) capital budgeting

---

Definitions:

Cash Coverage Ratio

A liquidity ratio that measures a company’s ability to pay off its debt obligations with its cash and cash equivalents.

Tax Rate

The percentage of income or value of a transaction that is required to be paid as tax to a governmental authority.

Interest Paid

The amount paid by a borrower to a lender in compensation for the use of borrowed money, typically expressed as an annual percentage of the principal.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations based on its current income. It's calculated by dividing earnings before interest and taxes (EBIT) by the interest expenses.