Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf Page 1
Instructor’s Manual for Financial
Management for Public, Health, and
Not-for-Profit Organizations1, 2E
INTRODUCTION
Chapter 1 TO
FINANCIAL
MANAGEMENT
Questions for Discussion
1-1. financial management is the subset of management that focuses on generating financial
information that can improve decisions. The decisions are oriented toward achieving the
various goals of the organization while maintaining a satisfactory financial situation.
Financial management encompasses the broad areas of accounting and finance.
1-2. In proprietary, or for-profit, organizations, an underlying goal is to maximize the wealth
of the owners of the organization.
1-3. In public service organizations, decisions are oriented toward achieving the various
goals of the organization while maintaining a satisfactory financial situation.
1-4. Accounting is a system for keeping track of the financial status of an organization and the
financial results of its activities. It has often been referred to as the language of
business. The vocabulary used by accounting is the language of nonbusiness organizations
as well.
1-5. Accounting is subdivided into two major areas: managerial accounting and financial
accounting. Managerial accounting relates to generating any financial information that
managers can use to improve the future results of the organization. This includes
techniques designed to generate any financial data that might help managers make more
effective decisions. Major aspects of managerial accounting relate to making financial plans
for the organization, implementing those plans, and then working to ensure that the
plans are achieved. Some examples of managerial accounting include preparing annual
operating budgets, generating information for use in making major investment
decisions, and providing the data needed to decide whether to buy or lease a major
4/20/2026 Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf
,Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf Page 2
piece of equipment. Financial accounting provides retrospective information. As events
that have financial implications occur they are recorded by the financial accounting
system. From time to time (usually monthly, quarterly, or annually), the recorded data are
summarized and reported to interested users. The users include both internal managers
and people outside the organization. Those outsiders include those who have lent or
might lend money to the organization (creditors), those who might sell things to the
organization (called suppliers or vendors), and other interested parties. These
interested parties may include those with a particular interest in public service
organizations, such as regulators, legislators, and citizens. Financial reports provide
information on the financial status of the organization at a specific point in time, as well as
reporting the past results of the organization‘s operations (i.e., how well it has done from
a financial viewpoint).
4/20/2026 Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf
,Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf Page 3
4/20/2026 Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf
, Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf Page 4
Chapter 3: Additional Budgeting Concepts 3-2
1-6. Finance focuses on the alternative sources and uses of the organization‘s financial
resources. Obtaining funds when needed from appropriate sources and the deployment
of resources within the organization fall under this heading. In addition, finance involves
the financial markets (such as stock and bond markets) that provide a means to
generating funds for organizations.
1-7. Yes. Achieving the goals of the organization requires financial planning. Financial
management provides information for managers to use in making their decisions. It
helps managers by providing information on the likely financial impact of each proposed
alternative. It also provides information about financial stability, efficiency, and
effectiveness.
1-8. Clearly, we might expect some public service organizations that are proprietary, such
as some hospitals, to earn profits. But what about other public service organizations such
as charities? They should make a profit as well. Profits provide a safety margin against
unexpected costs, provide resources to replace buildings and equipment, and to expand
and improve services.
1-9. Federal government (see text Figure 1-1)
Individual income taxes
Social insurance taxes
Corporate income tax
State and local government (see text Figure 1-4)
Sales and gross receipts tax
Federal government
Property taxes
Individual income taxes
Health sector (see text Figure 1-6)
Private insurance
Medicare
Medicaid
Other government programs
Not-for-profit sector (see text)
Private payments for goods and services
Government payments for goods and services
Donations
1-10. Federal government spending exceeded $6 trillion in 2020 and state and local government
4/20/2026 Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf Page 1
Instructor’s Manual for Financial
Management for Public, Health, and
Not-for-Profit Organizations1, 2E
INTRODUCTION
Chapter 1 TO
FINANCIAL
MANAGEMENT
Questions for Discussion
1-1. financial management is the subset of management that focuses on generating financial
information that can improve decisions. The decisions are oriented toward achieving the
various goals of the organization while maintaining a satisfactory financial situation.
Financial management encompasses the broad areas of accounting and finance.
1-2. In proprietary, or for-profit, organizations, an underlying goal is to maximize the wealth
of the owners of the organization.
1-3. In public service organizations, decisions are oriented toward achieving the various
goals of the organization while maintaining a satisfactory financial situation.
1-4. Accounting is a system for keeping track of the financial status of an organization and the
financial results of its activities. It has often been referred to as the language of
business. The vocabulary used by accounting is the language of nonbusiness organizations
as well.
1-5. Accounting is subdivided into two major areas: managerial accounting and financial
accounting. Managerial accounting relates to generating any financial information that
managers can use to improve the future results of the organization. This includes
techniques designed to generate any financial data that might help managers make more
effective decisions. Major aspects of managerial accounting relate to making financial plans
for the organization, implementing those plans, and then working to ensure that the
plans are achieved. Some examples of managerial accounting include preparing annual
operating budgets, generating information for use in making major investment
decisions, and providing the data needed to decide whether to buy or lease a major
4/20/2026 Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf
,Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf Page 2
piece of equipment. Financial accounting provides retrospective information. As events
that have financial implications occur they are recorded by the financial accounting
system. From time to time (usually monthly, quarterly, or annually), the recorded data are
summarized and reported to interested users. The users include both internal managers
and people outside the organization. Those outsiders include those who have lent or
might lend money to the organization (creditors), those who might sell things to the
organization (called suppliers or vendors), and other interested parties. These
interested parties may include those with a particular interest in public service
organizations, such as regulators, legislators, and citizens. Financial reports provide
information on the financial status of the organization at a specific point in time, as well as
reporting the past results of the organization‘s operations (i.e., how well it has done from
a financial viewpoint).
4/20/2026 Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf
,Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf Page 3
4/20/2026 Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf
, Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf Page 4
Chapter 3: Additional Budgeting Concepts 3-2
1-6. Finance focuses on the alternative sources and uses of the organization‘s financial
resources. Obtaining funds when needed from appropriate sources and the deployment
of resources within the organization fall under this heading. In addition, finance involves
the financial markets (such as stock and bond markets) that provide a means to
generating funds for organizations.
1-7. Yes. Achieving the goals of the organization requires financial planning. Financial
management provides information for managers to use in making their decisions. It
helps managers by providing information on the likely financial impact of each proposed
alternative. It also provides information about financial stability, efficiency, and
effectiveness.
1-8. Clearly, we might expect some public service organizations that are proprietary, such
as some hospitals, to earn profits. But what about other public service organizations such
as charities? They should make a profit as well. Profits provide a safety margin against
unexpected costs, provide resources to replace buildings and equipment, and to expand
and improve services.
1-9. Federal government (see text Figure 1-1)
Individual income taxes
Social insurance taxes
Corporate income tax
State and local government (see text Figure 1-4)
Sales and gross receipts tax
Federal government
Property taxes
Individual income taxes
Health sector (see text Figure 1-6)
Private insurance
Medicare
Medicaid
Other government programs
Not-for-profit sector (see text)
Private payments for goods and services
Government payments for goods and services
Donations
1-10. Federal government spending exceeded $6 trillion in 2020 and state and local government
4/20/2026 Instructor’s Manual
Instructor’s
for Financial
Manual
Management
for Financial
for Public,
Management
Health, and
for Public,
Not-for-Profit
Health,Organizations,
and Not-for-Profit
2E chOrganizations,
1-15.pdf 2E ch 1-15.pdf
