Instructor’s Manual for Financial Management for Public, Health, and Not-for-
3i 3i 3i 3i 3i 3i 3i 3i 3i
Profit Organizations1,
3i
SOLUTIONS MANUAL for Financial Management for Public
Health, and Not-for-Profit Organizations 7th Edition by
Steven Finkler, Thad Calabrese, (Complete 15 Chapters)
,Chapter 3: Additional Budgeting Concept
3i 3i 3i 3i 3-2
s
INTRODUCTION
Chapter 1 3i
TO
FINANCIALM i3
ANAGEMENT
Questions for Discussion 3i 3i
1-
1. Financial management is the subset of management that focuses on generating financial infor
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
mationthat can improve decisions. The decisions are oriented toward achieving the various goals
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3
of the organization while maintaining a satisfactory financial situation. Financial management enco
i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
mpassesthe broad areas of accounting and finance. i3 3i 3i 3i 3i 3i 3i
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 organizati
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
on.
1-
3. In public service organizations, decisions are oriented toward achieving the various goals of th
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
e organization while maintaining a satisfactory financial situation.
3i 3i 3i 3i 3i 3i 3i
1-
4. Accounting is a system for keeping track of the financial status of an organization and the fina
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ncial results of its activities. It has often been referred to as the language of business. The vocab
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ulary used by accounting is the language of nonbusiness organizations as well.
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
1-
5. Accounting is subdivided into two major areas: managerial accounting and financial accountin
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
g. Managerial accounting relates to generating any financial information that managers can use t
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
o improve the future results of the organization. This includes techniques designed to generate a
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ny financial data that might help managers make more effective decisions. Major aspects of mana
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
gerialaccounting relate to making financial plans for the organization, implementing those plans, a
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
nd thenworking to ensure that the plans are achieved. Some examples of managerial accounting
3i i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
include preparing annual operating budgets, generating information for use in making major inve
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
stment decisions, and providing the data needed to decide whether to buy or lease a major piece
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
of equipment. Financial accounting provides retrospective information. As events that have fina
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ncial implications occur they are recorded by the financial accounting system. From time to time (u
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
suallymonthly, quarterly, or annually), the recorded data are summarized and reported to interes
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ted users.The users include both internal managers and people outside the organization. Those o
3i i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
utsiders include those who have lent or might lend money to the organization (creditors), those
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
who might sell things to the organization (called suppliers or vendors), and other interested parti
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
es. These interested parties may include those with a particular interest in public service organizat
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ions, such asregulators, legislators, and citizens. Financial reports provide information on the fina
3i 3i i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
, Instructor’s Manual for Financial Management for Public, Health, and Not-for-
3i 3i 3i 3i 3i 3i 3i 3i 3i
ncial status
Profit
3i of the organization
Organizations
3i 3i 1, 3i at a specific point in time, as well as reporting the past results of t
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
he organization‘s operations (i.e., how well it has done from a financial viewpoint).
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
, Chapter 3: Additional Budgeting Concept
3i 3i 3i 3i 3-4
s
1-
6. Finance focuses on the alternative sources and uses of the organization‘s financial resources.
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
Obtaining funds when needed from appropriate sources and the deployment of resources within
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
theorganization fall under this heading. In addition, finance involves the financial markets (such a
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
s stock and bond markets) that provide a means to generating funds for organizations.
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
1-
7. Yes. Achieving the goals of the organization requires financial planning. Financial management
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
provides information for managers to use in making their decisions. It helps managers by providi
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ng information on the likely financial impact of each proposed alternative. It also provides inform
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ation about financial stability, efficiency, and effectiveness.
3i 3i 3i 3i 3i 3i
1-
8. Clearly, we might expect some public service organizations that are proprietary, such as some
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
hospitals, to earn profits. But what about other public service organizations such as charities? Th
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
eyshould make a profit as well. Profits provide a safety margin against unexpected costs, provide
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3
resources to replace buildings and equipment, and to expand and improve services.
i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
1-9. Federal government (see text Figure 1-1)
3 i 3i 3i 3i 3i 3i
Individual income taxes 3i 3i
Social insurance taxes 3i 3i
Corporate income tax 3i 3i
State and local government (see text Figure 1-4)
3i 3i 3i 3i 3i 3i 3i
Sales and gross receipts tax 3i 3i 3i 3i
Federal government 3i
Property taxes 3i
Individual income taxes 3i 3i
Health sector (see text Figure 1-6)
3i 3i 3i 3i 3i
Private insurance 3i
Medicare
Medicaid
Other government programs 3i 3i
Not-for-profit sector (see text) 3i 3i 3i
Private payments for goods and services 3i 3i 3i 3i 3i
Government payments for goods and services 3i 3i 3i 3i 3i
Donations
1-
10. Federal government spending exceeded $6 trillion in 2020 and state and local government spe
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ndingwas more than $3 trillion in 2018. In contrast, the GDP was $21 trillion in 2020. For more u
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
p to date information, examine the statistical tables of the most recent Economic Report of the P
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
resident, which is available online. 3i 3i 3i 3i
3i 3i 3i 3i 3i 3i 3i 3i 3i
Profit Organizations1,
3i
SOLUTIONS MANUAL for Financial Management for Public
Health, and Not-for-Profit Organizations 7th Edition by
Steven Finkler, Thad Calabrese, (Complete 15 Chapters)
,Chapter 3: Additional Budgeting Concept
3i 3i 3i 3i 3-2
s
INTRODUCTION
Chapter 1 3i
TO
FINANCIALM i3
ANAGEMENT
Questions for Discussion 3i 3i
1-
1. Financial management is the subset of management that focuses on generating financial infor
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
mationthat can improve decisions. The decisions are oriented toward achieving the various goals
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3
of the organization while maintaining a satisfactory financial situation. Financial management enco
i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
mpassesthe broad areas of accounting and finance. i3 3i 3i 3i 3i 3i 3i
1-2. In proprietary, or for-
3i 3i 3i 3i
profit, organizations, an underlying goal is to maximize the wealth of the owners of the organizati
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
on.
1-
3. In public service organizations, decisions are oriented toward achieving the various goals of th
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
e organization while maintaining a satisfactory financial situation.
3i 3i 3i 3i 3i 3i 3i
1-
4. Accounting is a system for keeping track of the financial status of an organization and the fina
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ncial results of its activities. It has often been referred to as the language of business. The vocab
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ulary used by accounting is the language of nonbusiness organizations as well.
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
1-
5. Accounting is subdivided into two major areas: managerial accounting and financial accountin
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
g. Managerial accounting relates to generating any financial information that managers can use t
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
o improve the future results of the organization. This includes techniques designed to generate a
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ny financial data that might help managers make more effective decisions. Major aspects of mana
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
gerialaccounting relate to making financial plans for the organization, implementing those plans, a
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
nd thenworking to ensure that the plans are achieved. Some examples of managerial accounting
3i i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
include preparing annual operating budgets, generating information for use in making major inve
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
stment decisions, and providing the data needed to decide whether to buy or lease a major piece
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
of equipment. Financial accounting provides retrospective information. As events that have fina
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ncial implications occur they are recorded by the financial accounting system. From time to time (u
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
suallymonthly, quarterly, or annually), the recorded data are summarized and reported to interes
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ted users.The users include both internal managers and people outside the organization. Those o
3i i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
utsiders include those who have lent or might lend money to the organization (creditors), those
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
who might sell things to the organization (called suppliers or vendors), and other interested parti
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
es. These interested parties may include those with a particular interest in public service organizat
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ions, such asregulators, legislators, and citizens. Financial reports provide information on the fina
3i 3i i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
, Instructor’s Manual for Financial Management for Public, Health, and Not-for-
3i 3i 3i 3i 3i 3i 3i 3i 3i
ncial status
Profit
3i of the organization
Organizations
3i 3i 1, 3i at a specific point in time, as well as reporting the past results of t
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
he organization‘s operations (i.e., how well it has done from a financial viewpoint).
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
, Chapter 3: Additional Budgeting Concept
3i 3i 3i 3i 3-4
s
1-
6. Finance focuses on the alternative sources and uses of the organization‘s financial resources.
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
Obtaining funds when needed from appropriate sources and the deployment of resources within
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
theorganization fall under this heading. In addition, finance involves the financial markets (such a
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
s stock and bond markets) that provide a means to generating funds for organizations.
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
1-
7. Yes. Achieving the goals of the organization requires financial planning. Financial management
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
provides information for managers to use in making their decisions. It helps managers by providi
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ng information on the likely financial impact of each proposed alternative. It also provides inform
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ation about financial stability, efficiency, and effectiveness.
3i 3i 3i 3i 3i 3i
1-
8. Clearly, we might expect some public service organizations that are proprietary, such as some
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
hospitals, to earn profits. But what about other public service organizations such as charities? Th
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
eyshould make a profit as well. Profits provide a safety margin against unexpected costs, provide
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3
resources to replace buildings and equipment, and to expand and improve services.
i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
1-9. Federal government (see text Figure 1-1)
3 i 3i 3i 3i 3i 3i
Individual income taxes 3i 3i
Social insurance taxes 3i 3i
Corporate income tax 3i 3i
State and local government (see text Figure 1-4)
3i 3i 3i 3i 3i 3i 3i
Sales and gross receipts tax 3i 3i 3i 3i
Federal government 3i
Property taxes 3i
Individual income taxes 3i 3i
Health sector (see text Figure 1-6)
3i 3i 3i 3i 3i
Private insurance 3i
Medicare
Medicaid
Other government programs 3i 3i
Not-for-profit sector (see text) 3i 3i 3i
Private payments for goods and services 3i 3i 3i 3i 3i
Government payments for goods and services 3i 3i 3i 3i 3i
Donations
1-
10. Federal government spending exceeded $6 trillion in 2020 and state and local government spe
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
ndingwas more than $3 trillion in 2018. In contrast, the GDP was $21 trillion in 2020. For more u
i3 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
p to date information, examine the statistical tables of the most recent Economic Report of the P
3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i 3i
resident, which is available online. 3i 3i 3i 3i
