Instructor’sjManualjforjFinancialjManagementjforjPublic,jHealth,jandjNot-for-ProfitjOrganizations1,
2E
INTRODUCTION
Chapter 1 j TO
FINANCIAL MA
j j
NAGEMENT
QuestionsjforjDiscussion
1-
1.j Financialjmanagementjisjthejsubsetjofjmanagementjthatjfocusesjonjgeneratingjfinancialjinformatio
njthatjcanjimprovejdecisions.jThejdecisionsjarejorientedjtowardjachievingjthejvariousjgoalsjofjthejorg
anizationjwhilejmaintainingjajsatisfactoryjfinancialjsituation.jFinancialjmanagementjencompassesjthejb
roadjareasjofjaccountingjandjfinance.
1-2.j Injproprietary,jorjfor-
profit,jorganizations,janjunderlyingjgoaljisjtojmaximizejthejwealthjofjthejownersjofjthejorganization.
1-
3.j Injpublicjservicejorganizations,jdecisionsjarejorientedjtowardjachievingjthejvariousjgoalsjofjthejorg
anizationjwhilejmaintainingjajsatisfactoryjfinancialjsituation.
1-
4.j Accountingjisjajsystemjforjkeepingjtrackjofjthejfinancialjstatusjofjanjorganizationjandjthejfinancialj
resultsjofjitsjactivities.jItjhasjoftenjbeenjreferredjtojasjthejlanguagejofjbusiness.jThejvocabularyjusedjb
yjaccountingjisjthejlanguagejofjnonbusinessjorganizationsjasjwell.
1-
5.j Accountingjisjsubdividedjintojtwojmajorjareas:jmanagerialjaccountingjandjfinancialjaccounting.j
Managerialjaccountingjrelatesjtojgeneratingjanyjfinancialjinformationjthatjmanagersjcanjusejtojimpro
vejthejfuturejresultsjofjthejorganization.jThisjincludesjtechniquesjdesignedjtojgeneratejanyjfinancialjd
atajthatjmightjhelpjmanagersjmakejmorejeffectivejdecisions.jMajorjaspectsjofjmanagerialjaccountingjr
elatejtojmakingjfinancialjplansjforjthejorganization,jimplementingjthosejplans,jandjthenjworkingjtojens
urejthatjthejplansjarejachieved.jSomejexamplesjofjmanagerialjaccountingjincludejpreparingjannualjop
eratingjbudgets,jgeneratingjinformationjforjusejinjmakingjmajorjinvestmentjdecisions,jandjprovidingjt
hejdatajneededjtojdecidejwhetherjtojbuyjorjleasejajmajorjpiecejofjequipment.j Financialjaccountingjpro
videsjretrospectivejinformation.jAsjeventsjthatjhavejfinancialjimplicationsjoccurjtheyjarejrecordedjbyjt
hejfinancialjaccountingjsystem.j Fromjtimejtojtimej(usuallyjmonthly,jquarterly,jorjannually),jthejrecord
edjdatajarejsummarizedjandjreportedjtojinterestedjusers.jThejusersjincludejbothjinternaljmanagersjandj
peoplejoutsidejthejorganization.jThosejoutsidersjincludejthosejwhojhavejlentjorjmightjlendjmoneyjtojt
hejorganizationj(creditors),jthosejwhojmightjselljthingsjtojthejorganizationj(calledjsuppliersjorjvendor
s),jandjotherjinterestedjparties.jThesejinterestedjpartiesjmayjincludejthosejwithjajparticularjinterestjinjp
ublicjservicejorganizations,jsuchjasjregulators,jlegislators,jandjcitizens.jFinancialjreportsjprovidejinfor
mationjonjthejfinancialjstatusjofjthejorganizationjatjajspecificjpointjinjtime,jasjwelljasjreportingjthejpast
jresultsjofjthejorganization‘sjoperationsj(i.e.,jhowjwelljitjhasjdonejfromjajfinancialjviewpoint).
,Chapterj3:jAdditionaljBudgetingjConcepts 3-2
1-
6.jFinancejfocusesjonjthejalternativejsourcesjandjusesjofjthejorganization‘sjfinancialjresources.jObtai
ningjfundsjwhenjneededjfromjappropriatejsourcesjandjthejdeploymentjofjresourcesjwithinjthejorganiz
ationjfalljunderjthisjheading.jInjaddition,jfinancejinvolvesjthejfinancialjmarketsj(suchjasjstockjandjbon
djmarkets)jthatjprovidejajmeansjtojgeneratingjfundsjforjorganizations.
1-
7.j Yes.jAchievingjthejgoalsjofjthejorganizationjrequiresjfinancialjplanning.jFinancialjmanagementjpr
ovidesjinformationjforjmanagersjtojusejinjmakingjtheirjdecisions.jItjhelpsjmanagersjbyjprovidingjinf
ormationjonjthejlikelyjfinancialjimpactjofjeachjproposedjalternative.jItjalsojprovidesjinformationjabou
tjfinancialjstability,jefficiency,jandjeffectiveness.
1-
8.j Clearly,jwejmightjexpectjsomejpublicjservicejorganizationsjthatjarejproprietary,jsuchjasjsomejhosp
itals,jtojearnjprofits.jButjwhatjaboutjotherjpublicjservicejorganizationsjsuchjasjcharities?jTheyjshouldj
makejajprofitjasjwell.jProfitsjprovidejajsafetyjmarginjagainstjunexpectedjcosts,jprovidejresourcesjtojre
placejbuildingsjandjequipment,jandjtojexpandjandjimprovejservices.
1-9.j Federaljgovernmentj(seejtextjFigurej1-1)
◼ Individualjincomejtaxes
◼ Socialjinsurancejtaxes
◼ Corporatejincomejtax
Statejandjlocaljgovernmentj(seejtextjFigurej1-4)
◼ Salesjandjgrossjreceiptsjtax
◼ Federaljgovernment
◼ Propertyjtaxes
◼ Individualjincomejtaxes
Healthjsectorj(seejtextjFigurej1-6)
◼ Privatejinsurance
◼ Medicare
◼ Medicaid
◼ Otherjgovernmentjprograms
Not-for-profitjsectorj(seejtext)
◼ Privatejpaymentsjforjgoodsjandjservices
◼ Governmentjpaymentsjforjgoodsjandjservices
◼ Donations
1-
10.jFederaljgovernmentjspendingjexceededj$6jtrillionjinj2020jandjstatejandjlocaljgovernmentjspending
jwasjmorejthanj$3jtrillionjinj2018.j Injcontrast,jthejGDPjwasj$21jtrillionjinj2020.j Forjmorejupjtojdateji
nformation,jexaminejthejstatisticaljtablesjofjthejmostjrecentjEconomicjReportjofjthejPresident,jwhichj
isjavailablejonline.
1-
11.jThejreportedjsurplusjincludesjbothjonjandjoffjbudgetjitems.j Socialjsecurityjtaxesjrepresentjanjoffjb
, Instructor’sjManualjforjFinancialjManagementjforjPublic,jHealth,jandjNot-for-ProfitjOrganizations1,
udgetj itemj thatj untilj recentlyj raisedj morej revenuej thanj wasj spentj onj socialj securityj payments.
,
2E
INTRODUCTION
Chapter 1 j TO
FINANCIAL MA
j j
NAGEMENT
QuestionsjforjDiscussion
1-
1.j Financialjmanagementjisjthejsubsetjofjmanagementjthatjfocusesjonjgeneratingjfinancialjinformatio
njthatjcanjimprovejdecisions.jThejdecisionsjarejorientedjtowardjachievingjthejvariousjgoalsjofjthejorg
anizationjwhilejmaintainingjajsatisfactoryjfinancialjsituation.jFinancialjmanagementjencompassesjthejb
roadjareasjofjaccountingjandjfinance.
1-2.j Injproprietary,jorjfor-
profit,jorganizations,janjunderlyingjgoaljisjtojmaximizejthejwealthjofjthejownersjofjthejorganization.
1-
3.j Injpublicjservicejorganizations,jdecisionsjarejorientedjtowardjachievingjthejvariousjgoalsjofjthejorg
anizationjwhilejmaintainingjajsatisfactoryjfinancialjsituation.
1-
4.j Accountingjisjajsystemjforjkeepingjtrackjofjthejfinancialjstatusjofjanjorganizationjandjthejfinancialj
resultsjofjitsjactivities.jItjhasjoftenjbeenjreferredjtojasjthejlanguagejofjbusiness.jThejvocabularyjusedjb
yjaccountingjisjthejlanguagejofjnonbusinessjorganizationsjasjwell.
1-
5.j Accountingjisjsubdividedjintojtwojmajorjareas:jmanagerialjaccountingjandjfinancialjaccounting.j
Managerialjaccountingjrelatesjtojgeneratingjanyjfinancialjinformationjthatjmanagersjcanjusejtojimpro
vejthejfuturejresultsjofjthejorganization.jThisjincludesjtechniquesjdesignedjtojgeneratejanyjfinancialjd
atajthatjmightjhelpjmanagersjmakejmorejeffectivejdecisions.jMajorjaspectsjofjmanagerialjaccountingjr
elatejtojmakingjfinancialjplansjforjthejorganization,jimplementingjthosejplans,jandjthenjworkingjtojens
urejthatjthejplansjarejachieved.jSomejexamplesjofjmanagerialjaccountingjincludejpreparingjannualjop
eratingjbudgets,jgeneratingjinformationjforjusejinjmakingjmajorjinvestmentjdecisions,jandjprovidingjt
hejdatajneededjtojdecidejwhetherjtojbuyjorjleasejajmajorjpiecejofjequipment.j Financialjaccountingjpro
videsjretrospectivejinformation.jAsjeventsjthatjhavejfinancialjimplicationsjoccurjtheyjarejrecordedjbyjt
hejfinancialjaccountingjsystem.j Fromjtimejtojtimej(usuallyjmonthly,jquarterly,jorjannually),jthejrecord
edjdatajarejsummarizedjandjreportedjtojinterestedjusers.jThejusersjincludejbothjinternaljmanagersjandj
peoplejoutsidejthejorganization.jThosejoutsidersjincludejthosejwhojhavejlentjorjmightjlendjmoneyjtojt
hejorganizationj(creditors),jthosejwhojmightjselljthingsjtojthejorganizationj(calledjsuppliersjorjvendor
s),jandjotherjinterestedjparties.jThesejinterestedjpartiesjmayjincludejthosejwithjajparticularjinterestjinjp
ublicjservicejorganizations,jsuchjasjregulators,jlegislators,jandjcitizens.jFinancialjreportsjprovidejinfor
mationjonjthejfinancialjstatusjofjthejorganizationjatjajspecificjpointjinjtime,jasjwelljasjreportingjthejpast
jresultsjofjthejorganization‘sjoperationsj(i.e.,jhowjwelljitjhasjdonejfromjajfinancialjviewpoint).
,Chapterj3:jAdditionaljBudgetingjConcepts 3-2
1-
6.jFinancejfocusesjonjthejalternativejsourcesjandjusesjofjthejorganization‘sjfinancialjresources.jObtai
ningjfundsjwhenjneededjfromjappropriatejsourcesjandjthejdeploymentjofjresourcesjwithinjthejorganiz
ationjfalljunderjthisjheading.jInjaddition,jfinancejinvolvesjthejfinancialjmarketsj(suchjasjstockjandjbon
djmarkets)jthatjprovidejajmeansjtojgeneratingjfundsjforjorganizations.
1-
7.j Yes.jAchievingjthejgoalsjofjthejorganizationjrequiresjfinancialjplanning.jFinancialjmanagementjpr
ovidesjinformationjforjmanagersjtojusejinjmakingjtheirjdecisions.jItjhelpsjmanagersjbyjprovidingjinf
ormationjonjthejlikelyjfinancialjimpactjofjeachjproposedjalternative.jItjalsojprovidesjinformationjabou
tjfinancialjstability,jefficiency,jandjeffectiveness.
1-
8.j Clearly,jwejmightjexpectjsomejpublicjservicejorganizationsjthatjarejproprietary,jsuchjasjsomejhosp
itals,jtojearnjprofits.jButjwhatjaboutjotherjpublicjservicejorganizationsjsuchjasjcharities?jTheyjshouldj
makejajprofitjasjwell.jProfitsjprovidejajsafetyjmarginjagainstjunexpectedjcosts,jprovidejresourcesjtojre
placejbuildingsjandjequipment,jandjtojexpandjandjimprovejservices.
1-9.j Federaljgovernmentj(seejtextjFigurej1-1)
◼ Individualjincomejtaxes
◼ Socialjinsurancejtaxes
◼ Corporatejincomejtax
Statejandjlocaljgovernmentj(seejtextjFigurej1-4)
◼ Salesjandjgrossjreceiptsjtax
◼ Federaljgovernment
◼ Propertyjtaxes
◼ Individualjincomejtaxes
Healthjsectorj(seejtextjFigurej1-6)
◼ Privatejinsurance
◼ Medicare
◼ Medicaid
◼ Otherjgovernmentjprograms
Not-for-profitjsectorj(seejtext)
◼ Privatejpaymentsjforjgoodsjandjservices
◼ Governmentjpaymentsjforjgoodsjandjservices
◼ Donations
1-
10.jFederaljgovernmentjspendingjexceededj$6jtrillionjinj2020jandjstatejandjlocaljgovernmentjspending
jwasjmorejthanj$3jtrillionjinj2018.j Injcontrast,jthejGDPjwasj$21jtrillionjinj2020.j Forjmorejupjtojdateji
nformation,jexaminejthejstatisticaljtablesjofjthejmostjrecentjEconomicjReportjofjthejPresident,jwhichj
isjavailablejonline.
1-
11.jThejreportedjsurplusjincludesjbothjonjandjoffjbudgetjitems.j Socialjsecurityjtaxesjrepresentjanjoffjb
, Instructor’sjManualjforjFinancialjManagementjforjPublic,jHealth,jandjNot-for-ProfitjOrganizations1,
udgetj itemj thatj untilj recentlyj raisedj morej revenuej thanj wasj spentj onj socialj securityj payments.
,
