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ACCA Applied Skills · Financial Management · Financial and other objectives in not-for-profit organisations

Which of the following is a typical characteristic that distinguishes a not-for-profit organisation from a profit-seeking company when setting financial objectives?

Not-for-profit organisations typically have non-financial objectives centred on delivering services to beneficiaries, with the financial aim of living within available funding. Unlike companies, they do not seek to maximise shareholder wealth, and they remain constrained by funding rather than financing through share issues.

  1. AIts primary objective is to maximise shareholder wealth
  2. BIts objectives are often non-financial and focus on service delivery within available fundsCorrect
  3. CIt is not subject to any financial constraints
  4. DIt can only be funded through equity share issues

Explanation

Not-for-profit organisations exist mainly to provide services or benefits, so their objectives are mostly non-financial, with a financial aim of operating within funds available. Maximising shareholder wealth is the aim of companies. They do face funding constraints and do not rely on equity issues.

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