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Solution Manual
for Financial Management for Public Health, and Not-for-Profit
Organizations 7th Edition by Finkler, Calabrese & Smith
Verified Chapters 1 - 15, Complete
, Chapter 1: INTRODUCTION 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 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).
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
1|Page
,bond markets) that provide a means to generating funds for organizations.
2|Page
, 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
3|Page
Solution Manual
for Financial Management for Public Health, and Not-for-Profit
Organizations 7th Edition by Finkler, Calabrese & Smith
Verified Chapters 1 - 15, Complete
, Chapter 1: INTRODUCTION 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 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).
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
1|Page
,bond markets) that provide a means to generating funds for organizations.
2|Page
, 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
3|Page
