Name: THINH QUANG LE
Date: 06/10/2015
Final Exam Answer
Chapter 1
1. Financial management is the subset of management that focuses on generating financial information that can be used to improve decision making.
2. For profit organizations, the goal of proprietary is making profit (maximizing revenue).
3. Accounting is a system for keeping track of the financial status of an organization and the financial results of its activities.
4. Finance is a field that focuses on the alternative sources and uses of an organization's resources.
5. Financial management is important for public service organization because in the public service organizations, the decisions are oriented toward achieving the various goals of the organization, and the financial management focus not only questions of survival, but also issues of effectiveness and efficiency.

Chapter 2
1. The primary purpose of :
- Proprietorship: maximize wealth of the owners of the organization.
- Not-for-profit: they operate with a goal providing a public benefit, and not aim for profit.
- City Governments: a form of public administration which in a majority of contexts, exists as the lowest tier of administration within a given state. They frequently have program that provide funds to not-for-profit organizations, operate city activities, and keep the city safe and developed.
2. These organizations should maintain satisfactory financial situations because in for-profit organizations, profits are the goal like proprietorship. In public service organizations, earning profit allows organizations to better accomplish their goals. Although earning profit is not why public service organizations exist, profits enhance that existence. This is true for several reason. First, profits provide an organization with a safety margin. Second, organizations must be able to replace their equipment and facilities over time as they wear out. Third, organizations often want to be able to expand their services over time.
3. The sources of:
- Proprietorship: the sources come from business activities (selling goods and services)and all other profit issues relating to his/her business.
- NGOs: Borrowing money (often from bank and other lenders), the sale of goods and services, fund-raising.
- City government: Collecting Taxes, sale of services, other revenues-transfers.
4. The plan indicates management's objectives and shows how it expects to obtain and uses resources to achieve those objectives.
5. The organization's mission is important because it improves society and heals the ill of society or feeding the poor.
6. The purpose of the strategic plan is defines the primary approaches that the organization will take to achieve its mission.
7. Budget is used because it indicates the amount of money that the organization will have available to spend to provide service and detailed action plan. Base on the information in the budget, manager make decisions that they believe will help them to carry out the plan to accomplish organization's objectives.

Chapter 3
1. Bottom-up budget is budget prepared by responsibility center managers, who inform the top management of their spending plans.
Top-down budget is budget prepared in a central fashion by the organization's top management. Responsibility center managers are told the budgeted amount and are expected to achieve the budgeted result.
2. Zero-based budgeting is the budgeting approach that requires an examination and justification of all costs rather than just the incremental costs and that requires examination of alternatives rather than just one approach.
3. Capital budgeting is the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structure (debt, equity or retained earnings). It is the process of allocating resources for major capital, or investment, expenditures.
4. Budgeting is important since budgeting allows organization to create a spending plan for its money and ensures that organization will always have enough money for the things it needs and the things that are important to it. Following a budget or spending plan will also keep organization out of debt or help it work its way out of debt if it is currently in debt.

Chapter 4
1. Cost objective is anything in particular for which a measurement of cost is desired-for example, a unit of service, a program, department, or organization.
2. Full cost is the total of all costs associated with a cost objective. This includes direct and indirect costs.
Direct costs are the costs incurred within the organizational unit which the manager has responsibility; costs of resources for direct production of a good or service.
Indirect costs are the costs that are assigned to an organizational unit from elsewhere in the organization; cots of resources that are not used for direct production of a good or service.
3. Marginal costs are the extra costs incurred as a result of providing one more service unit.

Chapter 5
1. Capital budget is plan for the acquisition of buildings and equipment that will be used by the organization in one or more years beyond the year acquisition. Often in a minimum dollar cutoff muse be exceeded for an item to be included in the capital budget.
2. Capital budgets cannot be consolidated with operating budget since when you budget for capital expenditures, you plan to buy assets. Assets include equipment and property that you expect to last more than one year. However, the operating budget covers day-to-day expenses. This can include wages, rent, utilities and purchases of items that are intended to last less than a year.
3. Capital budget also have some interacts with operating budget because an increase in capital expenditures can cause an increase in the operational budget. This occurs because assets often require maintenance. While the purchase of the assets comes out of the capital budget, maintenance comes out of the operational budget. Conversely, the operational budget can reduce the capital budget. If daily expenses grow too large, you will use up your cash paying bills instead of setting it aside for capital expenditures. The reason you must keep operational costs as low as possible is so you can have income left over for the purchase of assets.
4. Time Value of Money is The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. Also referred to as "present discounted value".
5. The net present value (NPV) is defined as the sum of the present values (PVs) of incoming and outgoing cash flows over a period of time. Incoming and outgoing cash flows can also be described as benefit and cost cash flows, respectively.

6. Compounding is the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.

The process of determining the present value of a payment or a stream of payments that is to be received in the future. Given the time value of money, a dollar is worth more today than it would be worth tomorrow given its capacity to earn interest. Discounting is the method used to figure out how much these future payments are worth today.

7. The problems with the payback method:
- It ignores any benefits that occur after the payback period and, therefore, does not measure profitability.
- It ignores the time value of money.

Chapter 6
1. The various types of long-term debt : Long-term notes, Mortgages, Bonds, Capital Leases.
2. Collateral is a specific asset the lender can claim if the borrower fail to make payment of amount due. The reason we use collateral is because collateral offers some security to the lender in case the borrower fails to pay back the loan, loans that are secured by collateral typically have lower interest rates than unsecured loans

3. Mortgages work as a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses to make large real estate purchases without paying the entire value of the purchase up front. Over a period of many years, the borrower repays the loan, plus interest, until he/she eventually owns the property free and clear. Mortgages are also known as "liens against property" or "claims on property." If the borrower stops paying the mortgage, the bank can foreclose. 4. Bond works as a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debt holders, or creditors, of the issuer.

Chapter 7
1. Working capital is the organization current assets and current liabilities.
2. Net working capital is current assets less current liabilities.
3. The profitable organization can also run out of money if the cash shortfalls as inventories and receivables increase. This need not create a crisis if management is aware of it and plans to handle the cash shortage.
4. Credit policies are critical to an organization because they relate to deciding to whom the organization will provide service without receiving immediate cash payment. Credit policies also reflect the risk of organizations when they do business with someone.

Chapter 8
1. Management control system is complete set of policies and procedures designed to keep operations going according to plan.
2. Internal control system is a system of accounting checks and balances designed to minimize both clerical errors and the possibility of fraud or embezzlement; the process and systems that ensure that decisions made in the organization are appropriate and receive apporpriate authorization. Requires a system of accounting and administrative controls.

Chapter 10
1. An asset is an economic resource. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent value of ownership that can be converted into cash (although cash itself is also considered an asset)
Moreover, assets are also a balance sheet item representing what a firm owns.
2. Liabilities are a company's legal debts or obligations that arise during the course of business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services.

3. Owner's equity is residual value after the liabilities of an organization are subtracted from the assets. This represents the portion of the assets owned by the organization itself or its owners.
4. Other names for owner's equity are net assets or fund balance.

Chapter 12
1. A non-governmental organization (NGO) is an organization that is neither a part of a government nor a conventional for-profit business. Usually set up by ordinary citizens, NGOs may be funded by governments, foundations, businesses, or private persons. Some avoid formal funding altogether and are run primarily by volunteers. NGOs are highly diverse groups of organizations engaged in a wide range of activities, and take different forms in different parts of the world. Some may have charitable status, while others may be registered for tax exemption based on recognition of social purposes. Others may be fronts for political, religious or other interest.

Other

1. The group case that impressed me is SR-520 since the project was really helpful and useful to community since. The SR 520 Floating Bridge and Landings project replaces the existing floating bridge and approaches from the future west approach structure east of Foster Island in Seattle to Evergreen Point Road in Medina.
The only thing that I thing we can improve here is the management system and budget control since this is the big project, and improve budget control and management system will enhance the speed of project as well as allocating resources efficiency.
2. The public budget on Smithsonian made me realize that Smithsonian isn’t just about the museums and research center, but also the most crucially important work that goes within them. They are not just a collection of items, but also the incredible discoveries, stories and learning opportunity they provide. I think the process can be improve by upgrading the goal, or we can say make the goal bigger since everything is under control, and we should aim for higher success.
3. The NGO- Red Cross was really interesting with the new concept that they help people around the world in many aspects and field, and not only donation. Their mission is " The Red Cross prevents and alleviates human suffering in the face of emergencies by mobilizing the power of volunteers and the generosity of donors."
If there is anything need to be done to improve the process, I think government and other public sector should be engage with Red Cross more to give the world a better balance. We should also establish more NGOs to raise fund and donation to support the Red Cross to maximize its strength to improve the world.