Financial Management in Nonprofit Organizations Research Paper - 1

financial Management in Nonprofit Organizations - look Paper ExampleIn fact, such regulative provisions aim to ensure that the organizations funds are properly used for the stated purpose. As compared to for-profit organizations, a nonprofit organization enterprise is not allowed to keep huge amount of surpluses with it. Since a nonprofit organizations financial attention is not liable to take any train of risk, it can operate freely with greater degree of certainty. In contrast, for-profit organizations bear some levels of business risks including debt financing. Generally, both nonprofit organizations and for-profit organizations use the incremental budgeting technique. Undoubtedly, restricted financial worry operations can reduce nonprofit organizations probability of failure. Introduction The experimental condition financial management plainly refers to the process of planning toward the future of an individual or a business organization so as to ensure a positive inflow and outflow of cash. To be more specific, financial management pertains to the best sourcing and utilization of financial resources of a business enterprise and the two key processes including resource management and finance operations constitute this process (Sofat & Hiro, 2011, p.20). Theoretical frameworks suggest that the application of financial management techniques in non-profit organizations is all different from its application in for-profit organizations. This paper will discuss the financial management practices in nonprofit organization. It will also compare and contrast the applications of financial management techniques in nonprofit organizations with that of for-profit organizations. Core Concepts of Financial Management Core concepts of financial management encompass capital budgeting, cash management, court of capital, capital expression planning, and dividend policy. Capital budgeting is a financial tool used to analyze whether an organizations long term inves tments like new plants, machinery, research and development projects, and other new products are worth pursuing. Cash management activities try to maintain an effective balance between inflow and outflow of cash. From the management view point, cost of capital represents the cost of a firms funds including debt and equity. The concept of capital structure refers to the room an organization uses particular combinations of equity, debt, and hybrid securities. Dividend policy refers to a strategic measure that an organization uses to decide the level of returns to be paid to its shareholders. The application of these financial management concepts depends on a number of factors in gain to the size and nature of the organization. Among them, the firms efficacy in applying these concepts is vital in order to make out a control over the organizations future cash flows. Therefore, firms usually establish differentiate finance departments so as to deal with their day to day financial ope rations. Financial Management in Nonprofit Organizations Unlike for-profit organizations, the primary goal of a nonprofit organization is not shareholder value maximization instead, it intends to meet specific socially desirable needs. As Griswold and Jarvis (2011) point out, nonprofit organizations lack financial flexibility as such institutions heavily depend on resource providers that are not active in exchange transaction. The resources provided are