Deck 12: Financial Management

Question 1

An organization that is ______ possesses sufficient cash to meet its obligations as they come due.

A) liquid
B) solvent
C) restricted
D) unrestricted

Answer 1

A

Question 2

The goal of the ______ is to provide enough payout each year to meet the needs of current programs while allowing the value of the endowment principal to grow.

A) cash budget
B) capital budget
C) spending limit
D) operating budget

Answer 2

C

Question 3

Accounting on a/an ______ basis takes money earned as well as obligations for expenditures not yet incurred.

A) cash
B) credit
C) accrual
D) multilevel

Answer 3

C

Question 4

Assessing ______ requires evaluating whether an organization is financially strong or in jeopardy.

A) liquidity
B) profitability
C) asset management
D) long-term solvency

Question 5

A board of directors is identifying allowable ranges for financial indicators. The board is developing ______.

A) spending limits
B) statements of financial position
C) financial and financial management policies
D) accountability and regulatory compliance policies

Question 6

What budget approach requires organizations to justify their budgets from the ground up?

A) zero-based
B) cost center
C) incremental
D) use-it-or-lose-it

Question 7

What is a decline in the value of an asset called?

A) inflation
B) deflation
C) amortization
D) depreciation

Question 8

Which type of donation needs to be invested in perpetuity?

A) liquid assets
B) pure endowment
C) unrestricted funds
D) quasi-endowment

Question 9

What practice involves the analysis of various financial ratios?

A) financial analysis
B) financial accounting
C) financial management
D) managerial accounting

Question 10

Which types of financial policies does Zietlow argue are doomed to fail?

A) internal
B) external
C) restrictive
D) prescriptive

Question 11

A fundamental principle of ______ requires that no one person handles an entire financial transaction.

A) endowments
B) internal control
C) external control
D) data integrity policies

Question 12

What type of funds are generally invested in secure, short-term instruments?

A) cash flow
B) endowment
C) unrestricted
D) operating reserves

Question 13

______ refers to the method used to record financial transactions.

A) Accounting
B) Bookkeeping
C) Record keeping
D) Financial management

Question 14

Which type of financial statement summaries an organization's assets and liabilities?

A) cash flows
B) activities
C) financial position
D) functional expenses

Question 15

What concept reflects investing an endowment in a long-term growth portfolio?

A) total return
B) spending limits
C) term endowment
D) asset management

Question 16

Which type of financial statement shows how every category of expense was allocated?

A) activities
B) cash flows
C) financial position
D) functional expenses

Question 17

What type of financial statement provides a snapshot of an organization's finances taken at a point in time?

A) activities
B) cash flows
C) financial position
D) functional expenses

Question 18

______ involve(s) ensuring the privacy of organizational records.

A) Data integrity policies
B) Managerial accounting
C) Accountability and regulatory compliance policies
D) The Uniform Management of Institutional Funds Act

Question 19

Which term is used to describe an organizational operating surplus?

A) ratio
B) solvency
C) liquidity
D) profitability

Question 20

What term describes the rules by which financial transactions are classified?

A) accounting
B) bookkeeping
C) data integrity policies
D) financial management

Question 21

A chief executive officer is telling a board of directors how much revenue was raised by renting out excess building space. This action is an example of ______.

A) being underwater
B) managing fixed assets
C) liquid asset management
D) assessing long-term solvency

Question 22

A nonprofit accountant is writing a comment explaining extenuating circumstances related to data reported in a statement of activities. The accountant is completing which type of financial statement?

A) addendum
B) required disclosures
C) notes to the financial statements
D) statement of functional expenses

Question 23

Equipment is considered a fixed asset.

Question 24

Physical assets serve the same purpose as operating reserves.

Question 25

A nonprofit board of directors is establishing an endowment investment portfolio to earn enough income to match future costs. This is an example of applying the ______ concept.

A) total return
B) least return
C) minimum return
D) equity minimum

Question 26

Accounting consists of rules for reporting financial transactions.

Question 27

A statement of financial position shows a snapshot of the organization's assets and liabilities at a point in time.

Question 28

Endowment funds are invested in perpetuity.

Question 29

Having diverse sources of revenue minimizes risk and maximizes autonomy for a nonprofit.

Question 30

A board of directors may withdraw funds from a quasi-endowment.

Question 31

A nonprofit organization depends on earned income as its only revenue source. According to Worth, this action is an example of a/an ______.

A) liability
B) business risk
C) spending limit
D) equity concept

Question 32

Endowment management is governed by state law.

Question 33

Bookkeeping is a method by which financial transactions are recorded.

Question 34

Accrual basis accounting records financial transactions even when the organization does not have sufficient cash flow.

Question 35

According to Worth, nonprofit organizations measure their success through the ______.

A) fund-raising results
B) number of clients served
C) financial and program results
D) number of endowments established

Question 36

A nonprofit organization offers its employees a health benefit option. This type of budget item is a/an ______ expense.

A) fixed
B) liquid
C) controllable
D) uncontrollable

Question 37

What term indicates the difference between assets and liabilities?

A) net assets
B) trade benefits
C) physical assets
D) accrual liabilities

Question 38

A nonprofit chief executive officer (CEO) is comparing program expenses to contributed income. The CEO is using a(an) ______ to assess organizational performance.

A) audit
B) balance sheet
C) financial ratio
D) depreciation formula

Question 39

A donor gave a nonprofit organization a $10,000 gift to pay the implementation costs of a new program. This is an example of a(an) ______.

A) endowment
B) trade benefit
C) permanent restriction
D) temporary restriction

Question 40

The Brown Foundation gave a local nonprofit organization a $1 million endowment. This action is an example of what type of revenue source?

A) earned income
B) fee for service
C) philanthropic gift
D) government grant

Question 41

Distinguish the differences between operating reserves, quasi-endowment funds, and permanently restricted endowment funds.

Question 42

Compare and contrast physical assets and financial assets.

Question 43

Explain the Uniform Prudent Management of Institutional Funds Act of 2006.

Question 44

Compare and contrast the two types of accounting.

Question 45

Identify how the use-it-or-lose-it approach to annual budgets can contribute to needless spending.

Question 46

Nonprofits should have an operating budget, a capital budget, and a cash budget.

Question 47

Explain the differences between "cost centers" and "profit centers."

Question 48

Compare and contrast statements of financial position, statements of activities, statements of cash flows, and statements of functional expenses.

Question 49

Depreciation refers to the differences between assets and liabilities.

Question 50

Identify and justify the responsibilities of a nonprofit's internal audit committee.

Question 51

Examine three separate budgets that nonprofit organizations should have and determine what each budget tracks.

Question 52

Compare and contrast the two types of endowments.