ACCA Applied Skills · Financial Management · Financial and other objectives in not-for-profit organisations
Which of the following is the most appropriate primary objective for a not-for-profit organisation such as a medical charity?
The most appropriate primary objective is delivering the greatest benefit to beneficiaries from the resources available. A not-for-profit exists to provide a service, with surplus only supporting that aim. It has no shareholders, so share value and earnings per share measures do not apply.
- AMaximising the surplus generated each year
- BMaximising the market value of its shares
- CDelivering the greatest possible benefit to its beneficiaries from the resources availableCorrect
- DMaximising earnings per share
Explanation
A not-for-profit organisation exists to provide a service or benefit, so its primary objective is usually stated in terms of service delivery or value for the beneficiaries. Surplus is only a constraint or means of sustaining activities. Share value and EPS are irrelevant because the charity has no shareholders.
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