Solution Manual for Financial Management for Public
S S S S S S
S Health, and Not-for-Profit Organizations 7th Edition by
S S S S S S
Steven Finkler, Thad Calabrese Verified all
S S S S S S
Chapter\\\'s 1 – 15 Complete Updated 2024/2025
S S S S S S
A+ S
, Instructor’s Manual for Financial Management for Public, Health, and Not-for-Profit Organizations1,
S S S S S S S S S S
INTRODUCTION
Chapter 1 S
S TOFINANCIALMANAGEMENT S
Questions for Discussion S S
1-1. Financial management is the subset of management that focuses on generating financial information
S S S S S S S S S S S S S
that can improve decisions. The decisions are oriented toward achieving the various goals of the
S S S S S S S S S S S S S S S
organization while maintaining a satisfactory financial situation. Financial management encompasses
S S S S S S S S S S
the broad areas of accounting and finance.
S S S S S S S
1-2. In proprietary, or for-profit, organizations, an underlying goal is to maximize the wealth of the
S S S S S S S S S S S S S S S
owners of the organization.
S S S S
1-3. In public service organizations, decisions are oriented toward achieving the various goals of the
S S S S S S S S S S S S S S
organization while maintaining a satisfactory financial situation.
S S S S S S S
1-4. Accounting is a system for keeping track of the financial status of an organization and the financial
S S S S S S S S S S S S S S S S S
results of its activities. It has often been referred to as the language of business. The vocabulary used
S S S S S S S S S S S S S S S S S S
by accounting is the language of nonbusiness organizations as well.
S S S S S S S S S S
1-5. Accounting is subdivided into two major areas: managerial accounting and financial accounting.
S S S S S S S S S S S S
Managerial accounting relates to generating any financial information that managers can use to
S S S S S S S S S S S S S
improve the future results of the organization. This includes techniques designed to generate any
S S S S S S S S S S S S S S
financial data that might help managers make more effective decisions. Major aspects of managerial
S S S S S S S S S S S S S S
accounting relate to making financial plans for the organization, implementing those plans, and then
S S S S S S S S S S S S S S
working to ensure that the plans are achieved. Some examples of managerial accounting include
S S S S S S S S S S S S S S
preparing annual operating budgets, generating information for use in making major investment
S S S S S S S S S S S S
decisions, and providing the data needed to decide whether to buy or lease a major piece of
S S S S S S S S S S S S S S S S S
equipment. Financial accounting provides retrospective information. As events that have financial
S S S S S S S S S S S
implications occur they are recorded by the financial accounting system. From time to time (usually
S S S S S S S S S S S S S S S
monthly, quarterly, or annually), the recorded data are summarized and reported to interested users.
S S S S S S S S S S S S S S
The users include both internal managers and people outside the organization. Those outsiders
S S S S S S S S S S S S S
include those who have lent or might lend money to the organization (creditors), those who might
S S S S S S S S S S S S S S S S
sell things to the organization (called suppliers or vendors), and other interested parties. These
S S S S S S S S S S S S S S
interested parties may include those with a particular interest in public service organizations, such as
S S S S S S S S S S S S S S S
regulators, legislators, and citizens. Financial reports provide information on the financial status of
S S S S S S S S S S S S S
the organization at a specific point in time, as well as reporting the past results of the organization‘s
S S S S S S S S S S S S S S S S S S
operations (i.e., how well it has done from a financial viewpoint).
S S S S S S S S S S S
, Instructor’s Manual for Financial Management for Public, Health, and Not-for-Profit Organizations1,
S S S S S S S S S S
1-6. Finance focuses on the alternative sources and uses of the organization‘s financial resources.
S S S S S S S S S S S S S
Obtaining funds when needed from appropriate sources and the deployment of resources within the
S S S S S S S S S S S S S S
organization fall under this heading. In addition, finance involves the financial markets (such as
S S S S S S S S S S S S S S
stock and bond markets) that provide a means to generating funds for organizations.
S S S S S S S S S S S S S
1-7. Yes. Achieving the goals of the organization requires financial planning. Financial management
S S S S S S S S S S S S
provides information for managers to use in making their decisions. It helps managers by providing
S S S S S S S S S S S S S S S
information on the likely financial impact of each proposed alternative. It also provides information
S S S S S S S S S S S S S S
about financial stability, efficiency, and effectiveness.
S S S S S S
1-8. Clearly, we might expect some public service organizations that are proprietary, such as some
S S S S S S S S S S S S S S
hospitals, to earn profits. But what about other public service organizations such as charities? They
S S S S S S S S S S S S S S S
should make a profit as well. Profits provide a safety margin against unexpected costs, provide
S S S S S S S S S S S S S S S
resources to replace buildings and equipment, and to expand and improve services.
S S S S S S S S S S S S
1-9. Federal government (see text Figure 1-1)
S S S S S S
Individual income taxes S S
Social insurance taxes S S
Corporate income tax S S
State and local government (see text Figure 1-4)
S S S S S S S
Sales and gross receipts tax S S S S
Federal government S
Property taxes S
Individual income taxes S S
Health sector (see text Figure 1-6)
S S S S S
Private insurance S
Medicare
Medicaid
Other government programs S S
Not-for-profit sector (see text) S S S
Private payments for goods and services S S S S S
Government payments for goods and services S S S S S
Donations
1-10. Federal government spending exceeded $6 trillion in 2020 and state and local government spending
S S S S S S S S S S S S S S
was more than $3 trillion in 2018. In contrast, the GDP was $21 trillion in 2020. For more up to date
S S S S S S S S S S S S S S S S S S S S S
information, examine the statistical tables of the most recent Economic Report of the President,
S S S S S S S S S S S S S S
which is available online.
S S S S
1-11. The reported surplus includes both on and off budget items. Social security taxes represent an off
S S S S S S S S S S S S S S S S
budget item that until recently raised more revenue than was spent on social security
S S S S S S S S S S S S S S
payments.
S
, The surplus in this area offset other government losses, and even resulted in an overall surplus for
S S S S S S S S S S S S S S S S
the federal government. This is no longer the case, and, over time, trust fund resources will be used
S S S S S S S S S S S S S S S S S S
up to provide benefits. As the federal government will not have access to the excess resources from
S S S S S S S S S S S S S S S S S
social security, it will have to borrow and increase the total level of federal debt, unless revenues or
S S S S S S S S S S S S S S S S S S
spending are changed.
S S S
1-12. Sometimes gifts come with strings attached. If the conditions of the gift create a burden that the
S S S S S S S S S S S S S S S S S
Sorganization does not want to accept, or somehow requires the organization to work in opposition to
S S S S S S S S S S S S S S S
Sits mission, it might turn down the gift.
S S S S S S S
1-13. The World Bank has defined NGOs as "private organizations that pursue activities to relieve
S S S S S S S S S S S S S S
Ssuffering, promote the interests of the poor, protect the environment, provide basic social services,
S S S S S S S S S S S S S
Sor undertake community development" (World Bank Operational Directive 14.70). NGOs are quite
S S S S S S S S S S S
Ssimilar to the not-for-profit organizations. They are primarily mission-focused rather than profit-
S S S S S S S S S S S
Sfocused. NGOs fall into three main categories: community-based, national, and international.
S S S S S S S S S S
S S S S S S
S Health, and Not-for-Profit Organizations 7th Edition by
S S S S S S
Steven Finkler, Thad Calabrese Verified all
S S S S S S
Chapter\\\'s 1 – 15 Complete Updated 2024/2025
S S S S S S
A+ S
, Instructor’s Manual for Financial Management for Public, Health, and Not-for-Profit Organizations1,
S S S S S S S S S S
INTRODUCTION
Chapter 1 S
S TOFINANCIALMANAGEMENT S
Questions for Discussion S S
1-1. Financial management is the subset of management that focuses on generating financial information
S S S S S S S S S S S S S
that can improve decisions. The decisions are oriented toward achieving the various goals of the
S S S S S S S S S S S S S S S
organization while maintaining a satisfactory financial situation. Financial management encompasses
S S S S S S S S S S
the broad areas of accounting and finance.
S S S S S S S
1-2. In proprietary, or for-profit, organizations, an underlying goal is to maximize the wealth of the
S S S S S S S S S S S S S S S
owners of the organization.
S S S S
1-3. In public service organizations, decisions are oriented toward achieving the various goals of the
S S S S S S S S S S S S S S
organization while maintaining a satisfactory financial situation.
S S S S S S S
1-4. Accounting is a system for keeping track of the financial status of an organization and the financial
S S S S S S S S S S S S S S S S S
results of its activities. It has often been referred to as the language of business. The vocabulary used
S S S S S S S S S S S S S S S S S S
by accounting is the language of nonbusiness organizations as well.
S S S S S S S S S S
1-5. Accounting is subdivided into two major areas: managerial accounting and financial accounting.
S S S S S S S S S S S S
Managerial accounting relates to generating any financial information that managers can use to
S S S S S S S S S S S S S
improve the future results of the organization. This includes techniques designed to generate any
S S S S S S S S S S S S S S
financial data that might help managers make more effective decisions. Major aspects of managerial
S S S S S S S S S S S S S S
accounting relate to making financial plans for the organization, implementing those plans, and then
S S S S S S S S S S S S S S
working to ensure that the plans are achieved. Some examples of managerial accounting include
S S S S S S S S S S S S S S
preparing annual operating budgets, generating information for use in making major investment
S S S S S S S S S S S S
decisions, and providing the data needed to decide whether to buy or lease a major piece of
S S S S S S S S S S S S S S S S S
equipment. Financial accounting provides retrospective information. As events that have financial
S S S S S S S S S S S
implications occur they are recorded by the financial accounting system. From time to time (usually
S S S S S S S S S S S S S S S
monthly, quarterly, or annually), the recorded data are summarized and reported to interested users.
S S S S S S S S S S S S S S
The users include both internal managers and people outside the organization. Those outsiders
S S S S S S S S S S S S S
include those who have lent or might lend money to the organization (creditors), those who might
S S S S S S S S S S S S S S S S
sell things to the organization (called suppliers or vendors), and other interested parties. These
S S S S S S S S S S S S S S
interested parties may include those with a particular interest in public service organizations, such as
S S S S S S S S S S S S S S S
regulators, legislators, and citizens. Financial reports provide information on the financial status of
S S S S S S S S S S S S S
the organization at a specific point in time, as well as reporting the past results of the organization‘s
S S S S S S S S S S S S S S S S S S
operations (i.e., how well it has done from a financial viewpoint).
S S S S S S S S S S S
, Instructor’s Manual for Financial Management for Public, Health, and Not-for-Profit Organizations1,
S S S S S S S S S S
1-6. Finance focuses on the alternative sources and uses of the organization‘s financial resources.
S S S S S S S S S S S S S
Obtaining funds when needed from appropriate sources and the deployment of resources within the
S S S S S S S S S S S S S S
organization fall under this heading. In addition, finance involves the financial markets (such as
S S S S S S S S S S S S S S
stock and bond markets) that provide a means to generating funds for organizations.
S S S S S S S S S S S S S
1-7. Yes. Achieving the goals of the organization requires financial planning. Financial management
S S S S S S S S S S S S
provides information for managers to use in making their decisions. It helps managers by providing
S S S S S S S S S S S S S S S
information on the likely financial impact of each proposed alternative. It also provides information
S S S S S S S S S S S S S S
about financial stability, efficiency, and effectiveness.
S S S S S S
1-8. Clearly, we might expect some public service organizations that are proprietary, such as some
S S S S S S S S S S S S S S
hospitals, to earn profits. But what about other public service organizations such as charities? They
S S S S S S S S S S S S S S S
should make a profit as well. Profits provide a safety margin against unexpected costs, provide
S S S S S S S S S S S S S S S
resources to replace buildings and equipment, and to expand and improve services.
S S S S S S S S S S S S
1-9. Federal government (see text Figure 1-1)
S S S S S S
Individual income taxes S S
Social insurance taxes S S
Corporate income tax S S
State and local government (see text Figure 1-4)
S S S S S S S
Sales and gross receipts tax S S S S
Federal government S
Property taxes S
Individual income taxes S S
Health sector (see text Figure 1-6)
S S S S S
Private insurance S
Medicare
Medicaid
Other government programs S S
Not-for-profit sector (see text) S S S
Private payments for goods and services S S S S S
Government payments for goods and services S S S S S
Donations
1-10. Federal government spending exceeded $6 trillion in 2020 and state and local government spending
S S S S S S S S S S S S S S
was more than $3 trillion in 2018. In contrast, the GDP was $21 trillion in 2020. For more up to date
S S S S S S S S S S S S S S S S S S S S S
information, examine the statistical tables of the most recent Economic Report of the President,
S S S S S S S S S S S S S S
which is available online.
S S S S
1-11. The reported surplus includes both on and off budget items. Social security taxes represent an off
S S S S S S S S S S S S S S S S
budget item that until recently raised more revenue than was spent on social security
S S S S S S S S S S S S S S
payments.
S
, The surplus in this area offset other government losses, and even resulted in an overall surplus for
S S S S S S S S S S S S S S S S
the federal government. This is no longer the case, and, over time, trust fund resources will be used
S S S S S S S S S S S S S S S S S S
up to provide benefits. As the federal government will not have access to the excess resources from
S S S S S S S S S S S S S S S S S
social security, it will have to borrow and increase the total level of federal debt, unless revenues or
S S S S S S S S S S S S S S S S S S
spending are changed.
S S S
1-12. Sometimes gifts come with strings attached. If the conditions of the gift create a burden that the
S S S S S S S S S S S S S S S S S
Sorganization does not want to accept, or somehow requires the organization to work in opposition to
S S S S S S S S S S S S S S S
Sits mission, it might turn down the gift.
S S S S S S S
1-13. The World Bank has defined NGOs as "private organizations that pursue activities to relieve
S S S S S S S S S S S S S S
Ssuffering, promote the interests of the poor, protect the environment, provide basic social services,
S S S S S S S S S S S S S
Sor undertake community development" (World Bank Operational Directive 14.70). NGOs are quite
S S S S S S S S S S S
Ssimilar to the not-for-profit organizations. They are primarily mission-focused rather than profit-
S S S S S S S S S S S
Sfocused. NGOs fall into three main categories: community-based, national, and international.
S S S S S S S S S S
