The fourth and final essential element of a nonprofit business model is the capital structure. The capital structure is revealed in the asset composition. Many nonprofits have substantial assets but virtually no liquidity because their assets are invested in buildings, long-term endowments, or restricted cash. Capital has been underemphasized in the nonprofit sector for years, with little attention paid to balance sheets and net assets. The importance of appropriate capital structure has never been clearer than now because unrestricted working capital creates capacity to invest in changes such as new fundraising initiatives, program development, and branding and marketing. Capital is also represented in the nonprofit’s financial obligations such as mortgages, long-term bonds, and other liabilities. The structure and cash requirements of these obligations can have a big impact on financial flexibility and cash flow.
Posted on: Fri, 06 Sep 2013 10:50:43 +0000