8.1

True or False

Financial management is concerned with the oversight of an organization's solvency by ensuring that cash flow is sufficient to meet organziational goals and consistent with organizational values.

TRUE

8.2

True or False

Financial management is only focused on the short-term

FALSE

It is focused on both the short and long term

8.3

What is managerial accounting?

The recording, classifying and summarizing of business transactions as well as financial and monetary events

8.4

What are the three purposes of managerial accounting?

1.  Provides a check on management's responsibility for handing airport monies

2.  Provides a means of control over business transactions

3.  Enables proof of compliance to regulations

8.5

What are the four responsibilities a manager has when they are acting as a financial manager?

1.  Oversee the use of airport assets

2.  Determine the most effective use of investment and capital opportunities

3.  Acquire and allocate funds

4.  Balance fiscal, political, social and regulatory realities

8.6

What are the six factors that can affect an airport's ability to be as self-sufficient as possible?

1.  Geographic location

2.  Level of aviation activity

3.  Competition

4.  Expansion capabilities

5.  Facilities available

6.  Regional socio-economic factors

8.7

The ratio of present value of future cash inflows divided by the present value of cash outflows is called what?

The profitability index (PI)

8.8

A PI value greater than ___ means that the overall return is greater than the cost.

1.0

8.9

What financial ratio can be defined as the discount rate in which the net present value is equal to zero?

The Internal Rate of Return (IRR)

8.10

What financial ratio is determined by dividing net profits by total assets?

Return on Investment (ROI)

8.11

True or False

In any calaculation of interest on a lease or capital investment, the ROI should be greater than the IRR.

TRUE

8.12

By what name does the set of standards and procedures established by the accounting profession and applies to both public and private institutions?

Generally Accepting Accounting Principles (GAAP)

8.13

What set of accounting principles apply to government agencies?

Government Accounting Standards Board

8.14

What type of depreciation method are airports required to follow under GAAP?

The straight line method

8.15

The annual charge against income that reflects the cost of capital improvements and equirpment through normal use is referred to as what?

Depreciation

8.16

True or False.

You can depreciate the cost of land 

FALSE

8.17

True or False

Depreciation is applied to major capital items having an expected life greater than a fixed period of time AND a value greater than an amount determined by the airport under GASB or GAAP.

TRUE

8.18

The paying off of a loan on an installment or regular payment basis is called what?

Amortization

8.19

What is the FAA's policy on rates and charges as it relates to retained earnings?

The airport must establish rates and charges equal to current year expenses and not on some future expense.

8.20

What is the purpose of financial statements?

Provides airport management a picture of how the airport is functioning financially.

8.21

Grant assurances requires airport management to retain records for what four types of financial transactions?

1.  AIP Grants

2.  PFC Funds

3.  Bond Ordinances

4.  Airline and other Use Agreements

8.22

What are the three most common financial documents?

1.  Balance Sheet

2.  Income Statement

3.  Statement of Cash Flow

8.23

What financial report provides a snapshot of the airport's assets and liabilities?

The Balance Sheet

8.24

Define the Breakeven Point.

The point at which revenue covers the cost of capital investment, administration and O+M costs.

8.25

An tangible object that has some value in the marketplace is called what?

An asset

8.26

The ability of an airport to turn assets into cash in order to pay off short-term loans is called what?

Liquidity

8.27

The interest that creditors or owners have in the airport is called what?

Owner's equity

8.28

The financial document that summarizes the net profit (or loss) of the airport over a period of time is called what?

The Income Statement

8.29

A financial assessment document that summarizes the sources and uses of funds through the year is called what?

The cast flow statement

8.30

What three critical functions does the cash flow statement provide?

1.  Reconciliation of cash on hand

2.  Shows the liquidity of an airport or tenant operation

3.  Allows a manager to determine when to borrow money, how much and whether debt should be retired or fixed assets acquired.

8.31

What are the three primary sources of cash flow at an airport?

1.  Operating

2.  Investment

3.  Financing

8.32

What are the five things financial ratios used for?

1.  Detect trends

2.  Make relative evaluations of a business's performance

3.  Make decisions

4.  Generate historic trend indicators

5.  Compare to other companies in same industry

8.33

What financial ratio is defined as the total current and long-term liabilities of an organization divided by the value of current and future assets?

The debt ratio

8.34

True or False

The lower the debt ratio, the stronger the financial position and leverage of the airport over its operations.

TRUE

8.35

What financial ratio determines the short-term solvency of a business since it removes inventory from the valuation of assets?

The quick ratio

8.36

What are the four ratios that indicate the short-term solvency of a business?

1.  Current Ratio

2.  Quick Ratio

3.  Debt Ratio

4.  Accounts Receivable Turnover Rate (TOR)

8.37

What is the difference between accrual and cash accounting?

8.38

What type of budget has as its goal the provision of accurate cost and revenue estimates for the short-term period?

Operating budget

8.39

What type of budget has as its goal the provision of long-term airport projects or courses of future activity for the purpose of allocating resources to those projects deemed desirable?

Capital budget

8.40

What functional groupings can revenue and expenses be divided into at an airport?

1.  Airfield

2.  Terminal

3.  Landside

4.  General/Administrative

8.41

The payment of interest and outstanding debt are examples of what type of expense?

Non-operating

8.42

The payment of wages, salaries, supplies, maintenance and advertising are examples of what type of expense?

Operating

8.43

What four aspects should a manager consider when preparing a budget?

1.  Plan for the operational needs of the organization

2.  Obtain resources from the airport's operating environment

3.  Distribute those resources throughout the organization

4.  Track the resource expenditures to ensure they are used effectively and efficiently

8.44

What are the 7 forms of budgeting?

1.  Program Plan Budgeting

2.  Traditional Budgeting

3.  Performance Based Budgeting

4.  Zero-based Budgeting

5.  Target-based Budgeting

6.  Revenue/Cost Centered Budgeting

7.  Line-Item Budgeting

8.45

What type of budgeting can be defined as a long-term approach that requires a full assessment of costs and developed by the Department of Defense as a way of shifting the emphasis from accounting to the economics of a cost-benefit analysis?

Program Plan Budgeting

8.46

What type of budgeting can be defined as an extension on the previous year's budget and amounts can increase or decrease based on overall projected revenues and costs?

Traditional Budgeting

8.47

What type of budgeting can be defined as the establishment of goals for a particular service and has an assumption that the best way to influence organizational behavior is through the budgetary process?

Performance-Based Budgeting

8.48

What type of budgeting can be defined as the zereoing out at the beginning of the budgetary cycle and requires each unit to fully examine their operational and capital needs?

Zero-based budgeting

8.49

What type of budgeting can be defined as being more flexible than zero-based budgeting and is an estimate of revenue and the establishment of a spending limit?

Target-based budgeting

8.50

What type of budgeting can be defined as the method that focuses on break-even needs and is gaining more popularity as airprorts move towards compensatory lease agreements?

Revenue/Cost Centered Budgeting

8.51

What type of budgeting can be defined as an expense chart of accounts and revenues broken down into their functional cost centers which allows for in-depth analysis of variances and efficiencies?

Line-Item Budgeting

8.52

The numbering and listing various cost centers in an organization is called what?

A chart of accounts

8.53

What financial report records the airport revenue against expenses over a period of time and compares the actual revenue and expenses against the budgeted amounts?

A budget variance report

8.54

What is management-by-exception?

A technique that focuses on variances within a specified budget item and strict limits are established.  If variances occur, then specific attention is placed on that budget item.