ACCA Applied Knowledge · Business and Technology · The purpose and types of business organisation
Which of the following best describes the primary objective of a typical not-for-profit organisation such as a charity?
A not-for-profit organisation's main objective is to achieve its social or charitable purpose within the funds it has available. It does not exist to maximise shareholder returns or distribute profits, so surpluses are reinvested in the mission rather than paid out to owners.
- AMaximising the return to its shareholders
- BAchieving its social or charitable purpose within the funds availableCorrect
- CMaximising annual surplus for distribution to its members
- DMinimising the amount of tax payable by its owners
Explanation
Not-for-profit organisations exist to deliver a social, charitable or member benefit rather than to maximise profit for owners. Success is judged by how well the mission is achieved with the resources available. Option A describes a private sector company and option C implies a distribution of profits that not-for-profit bodies do not make.
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