Financial Management for NonProfit Organizations 2019-05-06

Financial Management for NonProfit Organizations E-mail: ERASMUS.michalski@GoogleMail.com 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?

10 steps to Value CR Operating Cycle Assets AP Capital invested Capital structure FCF forecasting IRR Cost of Capital (CC) ∆ V

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 ….

Financial Management for NonProfit Organizations 2019-05-06

Financial Management for NonProfit Organizations E-mail: erasmus.MICHALSKI@gmail.com 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

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?

10 steps to Value Capital structure CR FCF forecasting Operating Cycle IRR Cost of Capital (CC) ∆ V CR Operating Cycle Assets AP Capital invested

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 ….

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 |

Financial Management for NonProfit Organizations 2019-05-06

Financial Management for NonProfit Organizations E-mail: erasmus.MICHALSKI@gmail.PL www: HTTP://MICHALSKIG.UE.WROC.PL/ Mobile: 48.503452860 Next meeting: . . . . Reading material: http://skroc.pl/fmno1 | http://skroc.pl/fmno2

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 ….

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 |

Financial Management for NonProfit Organizations 2019-05-06

Financial Management for NonProfit Organizations E-mail: erasmus.MICHALSKI@gmail.com www: HTTP://MICHALSKIG.UE.WROC.PL/ Mobile: 48.503452860 Next meeting: . . . . [EXAM]. Reading material: http://skroc.pl/fmno1 | http://skroc.pl/fmno2

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 ….

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