Grzegorz Michalski PhD
Wroclaw University of Economics
ul. Komandorska 118/120, p.Z-2, KFPiZW
PL53-345 Wroclaw, Poland
+48503452860
Grzegorz.Michalski@ue.wroc.pl
ABSTRACT
The managing team of Non-Profit Organization (NPO) choosing between various solutions in liquid assets needs to decide what level of risk is acceptable for her donors and other capital suppliers. That choice results with financing consequences, especially in cost level. In this paper, we consider that relation between risk and expected benefits from the liquid assets decision and its results on financing costs for the NPO. Depending on the kind of charity that the given NPO is doing, sensibility to liquid assets financing method risk might vary a lot. Character of mission also determines the best strategy that should be chosen whether it will be the conservative strategy or aggressive one or maybe some of the transitional variants similar to the compromise strategy. The best choice is that with the adequate cost of financing and highest NPO economic efficiency and effectiveness. This depends on the structure of financing costs. The lower the financing cost, the higher effectiveness of NPO activity. The managing team of NPO choosing between various solutions in liquid assets needs to decide what level of risk is acceptable for her donors and other money suppliers. It was shown in solutions presented in that paper. If their risk aversion is higher, will be preferred more safe solution. That choice results with cost of financing consequences. In this paper, we considered that relation between risk and expected benefits from the liquid assets decision and its results on financing costs for the NPO. Data used for our findings illustration is collected from 300+ Polish NPO’s for 2009-2010. Results based on that data helps us to illustrate relations we believe works in NPO’s liquid assets strategies best choice.
KEY WORDS: non-profit organizations, liquidity value, short-run financial management, financial liquidity strategies, liquid assets, working capital
JEL CLASSIFICATION: G31, L31, M21
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* Acknowledgment. The research is financed from the Polish science budget resources in the years 2010-2012 as the research project NN113021139