Instructor’s Manual for Financial Management for Public, Health, and Not-for-
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Profit Organizations1,
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SOLUTIONS MANUAL for Financial Management for Public H
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ealth, and Not-for-
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Profit Organizations 7th Edition by Steven Finkler, Thad Cala
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brese, (Complete 15 Chapters)
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,Chapter 3: Additional Budgeting Conce
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pts
INTRODUCTION
Chapter 1 w#
TO
FINANCIALM w
#
ANAGEMENT
Questions for Discussion w# w#
1-
1. Financial management is the subset of management that focuses on generating financial i
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nformationthat can improve decisions. The decisions are oriented toward achieving the vario
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us goals of the organization while maintaining a satisfactory financial situation. Financial mana
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gement encompassesthe broad areas of accounting and finance.
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1-2. In proprietary, or for-
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profit, organizations, an underlying goal is to maximize the wealth of the owners of the org
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anization.
1-
3. In public service organizations, decisions are oriented toward achieving the various goals
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of the organization while maintaining a satisfactory financial situation.
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1-
4. Accounting is a system for keeping track of the financial status of an organization and th
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e financial results of its activities. It has often been referred to as the language of business.
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The vocabulary used by accounting is the language of nonbusiness organizations as well.
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1-
5. Accounting is subdivided into two major areas: managerial accounting and financial accou
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nting. Managerial accounting relates to generating any financial information that managers c
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an use to improve the future results of the organization. This includes techniques designed
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to generate any financial data that might help managers make more effective decisions. Maj
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or aspects of managerialaccounting relate to making financial plans for the organization, impl
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ementing those plans, and thenworking to ensure that the plans are achieved. Some exampl
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# w# w# w# w# w# w# w# w# w#
es of managerial accounting include preparing annual operating budgets, generating informa
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tion for use in making major investment decisions, and providing the data needed to decide
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w#whether to buy or lease a major piece of equipment. Financial accounting provides retrosp
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ective information. As events that have financial implications occur they are recorded by the
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#financial accounting system. From time to time (usuallymonthly, quarterly, or annually), the r
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# w# w# w# w# w#
ecorded data are summarized and reported to interested users.The users include both inter
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# w# w# w# w#
nal managers and people outside the organization. Those outsiders include those who have
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lent or might lend money to the organization (creditors), those who might sell things to the
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w#organization (called suppliers or vendors), and other interested parties. These interested par
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ties may include those with a particular interest in public service organizations, such asregula
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#
, Instructor’s Manual for Financial Management for Public, Health, and Not-for-
w# w# w# w# w# w# w# w# w#
tors, legislators,
Profit
w# and 1, citizens. Financial reports provide information on the financial status of
Organizations
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the organization at a specific point in time, as well as reporting the past results of the orga
# w# w# w# w# w# w# w# w# w# w# w# w# w# w# w# w# w#
nization‘s operations (i.e., how well it has done from a financial viewpoint).
w# w# w# w# w# w# w# w# w# w# w#
, Chapter 3: Additional Budgeting Conce
w# w# w# w# 3-4
pts
1-
6. Finance focuses on the alternative sources and uses of the organization‘s financial resour
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ces. Obtaining funds when needed from appropriate sources and the deployment of resourc
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es within theorganization fall under this heading. In addition, finance involves the financial
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# w# w# w# w# w# w# w# w# w# w# w#
markets (such as stock and bond markets) that provide a means to generating funds for or
w# w# w# w# w# w# w# w# w# w# w# w# w# w# w#
ganizations.
1-
7. Yes. Achieving the goals of the organization requires financial planning. Financial manage
w# w# w# w# w# w# w# w# w# w# w# w#
ment provides information for managers to use in making their decisions. It helps manager
w# w# w# w# w# w# w# w# w# w# w# w# w#
s by providing information on the likely financial impact of each proposed alternative. It als
w# w# w# w# w# w# w# w# w# w# w# w# w# w#
o provides information about financial stability, efficiency, and effectiveness.
w# w# w# w# w# w# w# w#
1-
8. Clearly, we might expect some public service organizations that are proprietary, such as s
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ome hospitals, to earn profits. But what about other public service organizations such as ch
w# w# w# w# w# w# w# w# w# w# w# w# w# w#
arities? Theyshould make a profit as well. Profits provide a safety margin against unexpecte
w# w
# w# w# w# w# w# w# w# w# w# w# w# w#
d costs, provide resources to replace buildings and equipment, and to expand and improve
w# w# w# w# w# w# w# w# w# w# w# w# w# w#
services.
1-9. Federal government (see text Figure 1-1)
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Individual income taxes w# w#
Social insurance taxes w# w#
Corporate income tax w# w#
State and local government (see text Figure 1-4)
w# w# w# w# w# w# w#
Sales and gross receipts tax w# w# w# w#
Federal government w#
Property taxes w#
Individual income taxes w# w#
Health sector (see text Figure 1-6)
w# w# w# w# w#
Private insurance w#
Medicare
Medicaid
Other government programs w# w#
Not-for-profit sector (see text) w# w# w#
Private payments for goods and services
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Government payments for goods and services w# w# w# w# w#
Donations
1-
10. Federal government spending exceeded $6 trillion in 2020 and state and local governmen
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t spendingwas more than $3 trillion in 2018. In contrast, the GDP was $21 trillion in 2020.
w# w
# w# w# w# w# w# w# w# w# w# w# w# w# w# w# w# w#
w# w# w# w# w# w# w# w# w#
Profit Organizations1,
w#
SOLUTIONS MANUAL for Financial Management for Public H
w# w# w# w# w# w# w#
ealth, and Not-for-
w# w#
Profit Organizations 7th Edition by Steven Finkler, Thad Cala
w# w# w# w# w# w# w# w#
brese, (Complete 15 Chapters)
w# w# w#
,Chapter 3: Additional Budgeting Conce
w# w# w# w# 3-2
pts
INTRODUCTION
Chapter 1 w#
TO
FINANCIALM w
#
ANAGEMENT
Questions for Discussion w# w#
1-
1. Financial management is the subset of management that focuses on generating financial i
w# w# w# w# w# w# w# w# w# w# w# w# w#
nformationthat can improve decisions. The decisions are oriented toward achieving the vario
w
# w# w# w# w# w# w# w# w# w# w# w#
us goals of the organization while maintaining a satisfactory financial situation. Financial mana
w# w# w# w# w# w# w# w# w# w# w# w#
gement encompassesthe broad areas of accounting and finance.
w# w
# w# w# w# w# w# w#
1-2. In proprietary, or for-
w# w# w# w#
profit, organizations, an underlying goal is to maximize the wealth of the owners of the org
w# w# w# w# w# w# w# w# w# w# w# w# w# w# w#
anization.
1-
3. In public service organizations, decisions are oriented toward achieving the various goals
w# w# w# w# w# w# w# w# w# w# w# w# w#
of the organization while maintaining a satisfactory financial situation.
w# w# w# w# w# w# w# w#
1-
4. Accounting is a system for keeping track of the financial status of an organization and th
w# w# w# w# w# w# w# w# w# w# w# w# w# w# w# w#
e financial results of its activities. It has often been referred to as the language of business.
w# w# w# w# w# w# w# w# w# w# w# w# w# w# w# w#
The vocabulary used by accounting is the language of nonbusiness organizations as well.
w# w# w# w# w# w# w# w# w# w# w# w# w#
1-
5. Accounting is subdivided into two major areas: managerial accounting and financial accou
w# w# w# w# w# w# w# w# w# w# w# w#
nting. Managerial accounting relates to generating any financial information that managers c
w# w# w# w# w# w# w# w# w# w# w#
an use to improve the future results of the organization. This includes techniques designed
w# w# w# w# w# w# w# w# w# w# w# w# w# w#
to generate any financial data that might help managers make more effective decisions. Maj
w# w# w# w# w# w# w# w# w# w# w# w# w#
or aspects of managerialaccounting relate to making financial plans for the organization, impl
w# w# w# w
# w# w# w# w# w# w# w# w# w#
ementing those plans, and thenworking to ensure that the plans are achieved. Some exampl
w# w# w# w# w
# w# w# w# w# w# w# w# w# w#
es of managerial accounting include preparing annual operating budgets, generating informa
w# w# w# w# w# w# w# w# w# w#
tion for use in making major investment decisions, and providing the data needed to decide
w# w# w# w# w# w# w# w# w# w# w# w# w# w#
w#whether to buy or lease a major piece of equipment. Financial accounting provides retrosp
w# w# w# w# w# w# w# w# w# w# w# w# w#
ective information. As events that have financial implications occur they are recorded by the
w# w# w# w# w# w# w# w# w# w# w# w# w# w
#financial accounting system. From time to time (usuallymonthly, quarterly, or annually), the r
w# w# w# w# w# w# w# w
# w# w# w# w# w#
ecorded data are summarized and reported to interested users.The users include both inter
w# w# w# w# w# w# w# w# w
# w# w# w# w#
nal managers and people outside the organization. Those outsiders include those who have
w# w# w# w# w# w# w# w# w# w# w# w# w#
lent or might lend money to the organization (creditors), those who might sell things to the
w# w# w# w# w# w# w# w# w# w# w# w# w# w# w#
w#organization (called suppliers or vendors), and other interested parties. These interested par
w# w# w# w# w# w# w# w# w# w# w#
ties may include those with a particular interest in public service organizations, such asregula
w# w# w# w# w# w# w# w# w# w# w# w# w# w
#
, Instructor’s Manual for Financial Management for Public, Health, and Not-for-
w# w# w# w# w# w# w# w# w#
tors, legislators,
Profit
w# and 1, citizens. Financial reports provide information on the financial status of
Organizations
w# w# w# w# w# w# w# w# w# w# w# w# w
the organization at a specific point in time, as well as reporting the past results of the orga
# w# w# w# w# w# w# w# w# w# w# w# w# w# w# w# w# w#
nization‘s operations (i.e., how well it has done from a financial viewpoint).
w# w# w# w# w# w# w# w# w# w# w#
, Chapter 3: Additional Budgeting Conce
w# w# w# w# 3-4
pts
1-
6. Finance focuses on the alternative sources and uses of the organization‘s financial resour
w# w# w# w# w# w# w# w# w# w# w# w# w#
ces. Obtaining funds when needed from appropriate sources and the deployment of resourc
w# w# w# w# w# w# w# w# w# w# w# w#
es within theorganization fall under this heading. In addition, finance involves the financial
w# w# w
# w# w# w# w# w# w# w# w# w# w# w#
markets (such as stock and bond markets) that provide a means to generating funds for or
w# w# w# w# w# w# w# w# w# w# w# w# w# w# w#
ganizations.
1-
7. Yes. Achieving the goals of the organization requires financial planning. Financial manage
w# w# w# w# w# w# w# w# w# w# w# w#
ment provides information for managers to use in making their decisions. It helps manager
w# w# w# w# w# w# w# w# w# w# w# w# w#
s by providing information on the likely financial impact of each proposed alternative. It als
w# w# w# w# w# w# w# w# w# w# w# w# w# w#
o provides information about financial stability, efficiency, and effectiveness.
w# w# w# w# w# w# w# w#
1-
8. Clearly, we might expect some public service organizations that are proprietary, such as s
w# w# w# w# w# w# w# w# w# w# w# w# w# w#
ome hospitals, to earn profits. But what about other public service organizations such as ch
w# w# w# w# w# w# w# w# w# w# w# w# w# w#
arities? Theyshould make a profit as well. Profits provide a safety margin against unexpecte
w# w
# w# w# w# w# w# w# w# w# w# w# w# w#
d costs, provide resources to replace buildings and equipment, and to expand and improve
w# w# w# w# w# w# w# w# w# w# w# w# w# w#
services.
1-9. Federal government (see text Figure 1-1)
w # w# w# w# w# w#
Individual income taxes w# w#
Social insurance taxes w# w#
Corporate income tax w# w#
State and local government (see text Figure 1-4)
w# w# w# w# w# w# w#
Sales and gross receipts tax w# w# w# w#
Federal government w#
Property taxes w#
Individual income taxes w# w#
Health sector (see text Figure 1-6)
w# w# w# w# w#
Private insurance w#
Medicare
Medicaid
Other government programs w# w#
Not-for-profit sector (see text) w# w# w#
Private payments for goods and services
w# w# w# w# w#
Government payments for goods and services w# w# w# w# w#
Donations
1-
10. Federal government spending exceeded $6 trillion in 2020 and state and local governmen
w# w# w# w# w# w# w# w# w# w# w# w# w#
t spendingwas more than $3 trillion in 2018. In contrast, the GDP was $21 trillion in 2020.
w# w
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