Financial Management for Nonprofit Organizations
Policies and Practices
Chapter One
UNDERSTANDING NONPROFIT
ORGANIZATION FINANCES
1.1 DEFINITION OF NONPROFIT
ORGANIZATIONS 2
(a) 501 (c)(3) Corporations 3
(b) Bylaws and Articles of Incorporation 4
1.2 CHARACTERISTICS OF NONPROFIT
ORGANIZATIONS 6
(a) Organizational Mission 6
(b) Organizational Structure 7
1.3 UNDERSTANDING THE LANGUAGE OF
THE NONPROFIT ORGANIZATION 7
1.4 FINANCIAL POLICIES 8
1.5 FINANCIAL PRACTICES 9
1.6 PRIMARY FINANCIAL OBJECTIVE 10
(a) Differences between Businesses and
Donative Nonprofits 11
(b) Survey Evidence on the Primary
Financial Objective 12
(c) Financial Objective for Purely Financial
Decisions 13
(d) Recommended Primary Financial
Objective: Approximate Liquidity
Target 13
1.7 CONCLUSION 14
APPENDIX 1A: THE LILLY STUDY
FINDINGS 16
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