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
1|Page
, 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
2|Page
,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 Bond Markets)
That Provide A Means To Generating Funds For Organizations.
3|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
Medica
4|Page
Management For Public, Health,
And Not- For-Profit Organizations
8th Edition
By Steven A. Finkler, Thad D.
Calabrese & Daniel L. Smith
1|Page
, 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
2|Page
,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 Bond Markets)
That Provide A Means To Generating Funds For Organizations.
3|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
Medica
4|Page
