FMNO | Financial Management for NonProfit Organizations | © Financial Management for NonProfit Organizations

FMNO | Financial Management for NonProfit Organizations | © 2 Financial Management for NonProfit Organizations www: Mobile: meetings + 1 exam (test) Next meeting:.... Reading material: | Zietlow J., J.A. Hankin, A.G. Seidner, Financial Management for Nonprofit Organizations: Policies and Practices, Wiley Herman M.L., G.L. Head, P.M. Jackson, T.E. Fogarty, Managing Risk in Nonprofit Organizations: A Comprehensive Guide, Wiley 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 Hankin J.A., A.G. Seidner, J. Zietlow, Financial Management for Nonprofit Organizations, Wiley Maddox D.C., Budgeting for Not-for-Profit Organizations, Wiley Zietlow J.T., A. Seidner, Cash and Investment Management for Nonprofit Organizations, John Wiley & Sons, New York PDF1: PDF2:

FMNO | Financial Management for NonProfit Organizations | © 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

FMNO | Financial Management for NonProfit Organizations | © 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

FMNO | Financial Management for NonProfit Organizations | © 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 …. 5

FMNO | Financial Management for NonProfit Organizations | © Financial Management for NonProfit Organizations

FMNO | Financial Management for NonProfit Organizations | © 7 Financial Management for NonProfit Organizations www: Mobile: meetings + 1 exam (test) Next meeting:.... Reading material: |

FMNO | Financial Management for NonProfit Organizations | © 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

FMNO | Financial Management for NonProfit Organizations | © 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

FMNO | Financial Management for NonProfit Organizations | © 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 …. 10

FMNO | Financial Management for NonProfit Organizations | © 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 (k d =8%), the rest: equity (unleveraged beta = 0.72) [ ] 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 | 11

FMNO | Financial Management for NonProfit Organizations | © Financial Management for NonProfit Organizations

FMNO | Financial Management for NonProfit Organizations | © 13 Financial Management for NonProfit Organizations www: Mobile: Next meeting:.... Reading material: |

FMNO | Financial Management for NonProfit Organizations | © 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 …. 14

FMNO | Financial Management for NonProfit Organizations | © 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 (k d =7%) and equity (unleveraged beta for educational services = 0.82) [ ] 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 | 15

FMNO | Financial Management for NonProfit Organizations | © Financial Management for NonProfit Organizations

FMNO | Financial Management for NonProfit Organizations | © 17 Financial Management for NonProfit Organizations www: Mobile: Next meeting:.... [EXAM]. Reading material: |

FMNO | Financial Management for NonProfit Organizations | © 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 …. 18

FMNO | Financial Management for NonProfit Organizations | © CASE3: water-supply institution Nonprofit water-supply institution. People will paid 4€ for 1m 3, in 40ooo town. Average water demand is 8m 3 monthly per one person. Fixed Costs: 600ooo monthly, | Variable Costs: 2,3 € per every customer and 3,6 per every m 3. Waterworks equipment cost 148ooooo€ will be covered in 40% by debt (k d =7%) and the rest 60% by equity (unleveraged beta for water utility = 0.51) [ ]. 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 19