FMNO | Financial Management for NonProfit Organizations | © 2015-08-06 Financial Management for NonProfit Organizations

FMNO | Financial Management for NonProfit Organizations | © http://michalskig.com/

19.04.23

Financial Management for

NonProfit Organizations

FMNO | Financial Management for NonProfit Organizations | © http://michalskig.com/2

Financial Management for NonProfit Organizations

E-mail: [email protected]

www: HTTP://MICHALSKIG.UE.WROC.PL/

Mobile: 48.503452860

5 meetings + 1 exam (test)

Next meeting: . . . .

Reading material: http://skroc.pl/fmno1 | http://skroc.pl/fmno2 Zietlow J., J.A. Hankin, A.G. Seidner, Financial Management for Nonprofit Organizations: Policies and Practices, Wiley 2007. Herman M.L., G.L. Head, P.M. Jackson, T.E. Fogarty, Managing Risk in Nonprofit Organizations:

A Comprehensive Guide, Wiley 2003. Bryce H.J., Financial and Strategic Management for Nonprofit Organizations: A Comprehensive

Reference to Legal, Financial, Management, and Operations Rules and Guidelines for Nonprofits, Wiley 2000.

Hankin J.A., A.G. Seidner, J. Zietlow, Financial Management for Nonprofit Organizations, Wiley 1998.

Maddox D.C., Budgeting for Not-for-Profit Organizations, Wiley 1999. Zietlow J.T., A. Seidner, Cash and Investment Management for Nonprofit Organizations, John

Wiley & Sons, New York 2007. PDF1:

http://www.swlearning.com/finance/brigham/theory11e/web_chapters/bri59689_ch30_web.pdf PDF2: http://www.swlearning.com/finance/brigham/theory10e/resources/brig-fm10-WebCh30-

r1.pdf


The financial aim of nonprofit financial management?

The best realization of the mission measured by maximization of stakeholders profits (both social and financial):

First: how we calculate realization of the general aim in for-profit financial management?

3

n

nn

n

CC

SV

CC

FCFV

11


10 steps to Value

1) CR

2) Operating Cycle

3) Assets

4) AP

5) Capital invested

6) Capital structure

7) FCF forecasting

8) IRR

9) Cost of Capital (CC)

10) ∆ V

4


NonProfit Finance cases:

Hospital / Medical service

School (of something: primary, cooking, musical etc.)

Religion based home of help (ex-drunks, ex-addicts, orphanages, etc.)

Donation based WOŚP etc.

Commune businesses: water-supply institutions

….

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19.04.23




Financial Management for NonProfit Organizations E-mail: [email protected]


Mobile: 48.503452860

5 meetings + 1 exam (test)

Next meeting: . . . .

Reading material: http://skroc.pl/fmno1 | http://skroc.pl/fmno2


The financial aim of nonprofit financial management?

The best realization of the mission measured by maximization of stakeholders profits (both social and financial):

First: how we calculate realization of the general aim in for-profit financial management?

8

n

nn

n

CC

SV

CC

FCFV

11


10 steps to Value

1) CR

2) Operating Cycle

3) Assets

4) AP

5) Capital invested

9

6) Capital structure

7) FCF forecasting

8) IRR

9) Cost of Capital (CC)

10) ∆ V








….

10


CASE1: Hospital / Medical service Small nonprofit anticancer service want to buy X-ray machine (48ooo Euros) for

mammography. Economical time of life for such kinds of engines is 6 years.

According to forecasts it could serve up to 2100 patients monthly, and they will pay 4 Euros for one scan. The rest of the payment (10 Euros for one scan) will be paid by local government.

Fixed Costs: room with one clerc (300 euros/month), diagnostician (2ooo Euros monthly), service/repair: 2 times by year (350 Euros)| Variable Costs: Energy, plates and other materials (1Euro per scan).

20ooo will be covered by debt (kd=8%), the rest: equity (unleveraged beta = 0.72) [

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html ]

NWC: 20% of CR

Number of patients:

Year: 200X | 200X+1 | 200X+2 | 200X+3 | 200X+4 | 200X+5 | 200X+6 | 200X+7 | 200X+8..n |

Q: 20ooo | 18ooo | 20ooo | 23ooo | 245oo | 24ooo | 252oo | 25ooo | 25ooo |

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19.04.23




Financial Management for NonProfit Organizations

E-mail: [email protected]


Mobile: 48.503452860

Next meeting: . . . . Reading material: http://skroc.pl/fmno1 |

http://skroc.pl/fmno2








….

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CASE2: School Nonprofit charity decide to start three year one-class school. One class population is average

16 childreen.

The school will work for 6 hours daily. Fee is 25o€ monthly per one child, paid by the parents. The educational dotation paid by local government is 70ooo€ in every year.

Fixed Costs: 5 teachers with 1 clerc (teacher 1600€/month, clerc 900 €/month), energy and water: (450€ / month), rent for building: 1200€ / month| Variable Costs: 0€.

School equipment 30ooo€ will be covered by debt (kd=7%) and equity (unleveraged beta for educational services = 0.82) [ http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html ]

NWC: 300€

Number of pupils:

Year: 200X | 200X+1 | 200X+2 | 200X+3 | 200X+4 | 200X+5 | 200X+6 | 200X+7 | 200X+8..n |

Q: 45 | 48 | 46 | 44 | 43 | 42 | 46 | 38 | 39 |

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19.04.23




Financial Management for NonProfit Organizations E-mail: [email protected]


Mobile: 48.503452860

Next meeting: . . . . [EXAM].

Reading material: http://skroc.pl/fmno1 | http://skroc.pl/fmno2








….

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CASE3: water-supply institution Nonprofit water-supply institution.

People will paid 4€ for 1m3, in 40ooo town. Average water demand is 8m3 monthly per one person.

Fixed Costs: 600ooo monthly, | Variable Costs: 2,3 € per every customer and 3,6 per every m3.

Waterworks equipment cost 148ooooo€ will be covered in 40% by debt (kd=7%) and the rest 60% by equity (unleveraged beta for water utility = 0.51) [

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html ]. Economic time of life is 8 years.

NWC: 10ooo

Number of customers (in 000):

Year: 200X | 200X+1 | 200X+2 | 200X+3 | 200X+4 | 200X+5 | 200X+6 | 200X+7 | 200X+8..n |

Q: 37 | 38 | 36 | 34 | 33 | 32 | 36 | 38 | 39 |

What level should reach the local government donation for: every year or for start only to have NPV = 0

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FMNO | Financial Management for NonProfit Organizations | © 2015-08-06 Financial Management for NonProfit Organizations