Franklyn A Plus Pass
Solutions Manual for Financial
Management for Public, Health, and Not-
for-Profit Organizations 8th Edition
by Steven A. Finkler, Thad D. Calabrese
& Daniel L. Smith
All Chapters 1-15| A+ PASS
Fr
an
kl
yn
e
A
pl
us
Pa
1|Page
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, Franklyn A Plus Pass
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
Fr
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
an
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
kl
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
yn
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
e
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).
A
pl
1-6. Finance focuses on the alternative sources and uses of the organization‗s financial resources.
us
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.
Pa
2|Page
ss
, Franklyn A Plus Pass
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
Fr
Individual income taxes
an
Health sector (see text Figure 1-6)
kl
Private insurance
yn
Medicare
Medicaid
e
Other government programs
A
pl
Not-for-profit sector (see text)
Private payments for goods and services
us
Government payments for goods and services
Pa
3|Page
ss
, Franklyn A Plus Pass
Donations
1-10. Federal government spending exceeded $6 trillion in 2020 and state and local government spending
was more than $3 trillion in 2018. In contrast, the GDP was $21 trillion in 2020. For more up to date
information, examine the statistical tables of the most recent Economic Report of the President, which is
available online.
1-11. The reported surplus includes both on and off budget items. Social security taxes represent an off
budget item that until recently raised more revenue than was spent on social security payments.
The surplus in this area offset other government losses, and even resulted in an overall surplus for the
federal government. This is no longer the case, and, over time, trust fund resources will be used up to
provide benefits. As the federal government will not have access to the excess resources from social
security, it will have to borrow and increase the total level of federal debt, unless revenues or spending are
changed.
1-12. Sometimes gifts come with strings attached. If the conditions of the gift create a burden that the
organization does not want to accept, or somehow requires the organization to work in opposition to its
mission, it might turn down the gift.
1-13. The World Bank has defined NGOs as "private organizations that pursue activities to relieve
suffering, promote the interests of the poor, protect the environment, provide basic social services, or
undertake community development" (World Bank Operational Directive 14.70). NGOs are quite similar
Fr
to the not-for-profit organizations. They are primarily mission-focused rather than profit- focused. NGOs
fall into three main categories: community-based, national, and international.
an
kl
Chapter 2 PLANNING FOR SUCCESS: BUDGETING
yn
Questions for Discussion
e
2-1. Planning helps the organization by causing its employees to think ahead and anticipate change. This
is done by establishing specific goals and objectives, communicating those objectives to the individuals
A
who must achieve them, forecasting future events, developing alternatives, selecting from among
alternatives, and coordinating activities. The activities are summarized in a document called a budget. The
budget describes what we hope to achieve and the resources that will be used to carry out the
pl
organization‗s activities.
us
Pa
4|Page
ss
Solutions Manual for Financial
Management for Public, Health, and Not-
for-Profit Organizations 8th Edition
by Steven A. Finkler, Thad D. Calabrese
& Daniel L. Smith
All Chapters 1-15| A+ PASS
Fr
an
kl
yn
e
A
pl
us
Pa
1|Page
ss
, Franklyn A Plus Pass
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
Fr
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
an
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
kl
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
yn
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
e
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).
A
pl
1-6. Finance focuses on the alternative sources and uses of the organization‗s financial resources.
us
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.
Pa
2|Page
ss
, Franklyn A Plus Pass
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
Fr
Individual income taxes
an
Health sector (see text Figure 1-6)
kl
Private insurance
yn
Medicare
Medicaid
e
Other government programs
A
pl
Not-for-profit sector (see text)
Private payments for goods and services
us
Government payments for goods and services
Pa
3|Page
ss
, Franklyn A Plus Pass
Donations
1-10. Federal government spending exceeded $6 trillion in 2020 and state and local government spending
was more than $3 trillion in 2018. In contrast, the GDP was $21 trillion in 2020. For more up to date
information, examine the statistical tables of the most recent Economic Report of the President, which is
available online.
1-11. The reported surplus includes both on and off budget items. Social security taxes represent an off
budget item that until recently raised more revenue than was spent on social security payments.
The surplus in this area offset other government losses, and even resulted in an overall surplus for the
federal government. This is no longer the case, and, over time, trust fund resources will be used up to
provide benefits. As the federal government will not have access to the excess resources from social
security, it will have to borrow and increase the total level of federal debt, unless revenues or spending are
changed.
1-12. Sometimes gifts come with strings attached. If the conditions of the gift create a burden that the
organization does not want to accept, or somehow requires the organization to work in opposition to its
mission, it might turn down the gift.
1-13. The World Bank has defined NGOs as "private organizations that pursue activities to relieve
suffering, promote the interests of the poor, protect the environment, provide basic social services, or
undertake community development" (World Bank Operational Directive 14.70). NGOs are quite similar
Fr
to the not-for-profit organizations. They are primarily mission-focused rather than profit- focused. NGOs
fall into three main categories: community-based, national, and international.
an
kl
Chapter 2 PLANNING FOR SUCCESS: BUDGETING
yn
Questions for Discussion
e
2-1. Planning helps the organization by causing its employees to think ahead and anticipate change. This
is done by establishing specific goals and objectives, communicating those objectives to the individuals
A
who must achieve them, forecasting future events, developing alternatives, selecting from among
alternatives, and coordinating activities. The activities are summarized in a document called a budget. The
budget describes what we hope to achieve and the resources that will be used to carry out the
pl
organization‗s activities.
us
Pa
4|Page
ss
