Environmental Defense
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Financial Analysis
Environment Defense, a leading environmental advocacy group, is classified as a nongovernmental not for profit organization. Operating as a not for profit agency, the main purpose of the organization is not profit, but to help with the cause for which the organization was formed. Since NPO’s do not operate like for profit businesses, NPO’s require different measurement standards. At a minimum, a not for profit organization (NPO) must break-even or generate surpluses over time in order to remain financially viable. Appendix (Total revenue vs. operating expenses chart 1) shows that Environmental defense has had enough program revenues to cover its expenses every year except 1996, where their expenses exceeded revenues by seventy three dollars, which was made up for in the next operating year. For a NPO, net income is the total change in unrestricted net assets. Appendix (Total change in unrestricted net assets chart 2) shows Environmental Defense’s “net income” since 1985. Based on this chart, Environmental Defense is a viable organization.
The best way to evaluate a NPO’s performance is to answer the question: Did the institution live within its means for the year being measured? Significant operating losses can impair the ability of the organization to continue operations. The net income ratio best measures how well the organization lived within its means for the year. Appendix (net income ratio chart 3) shows Environmental Defense’s net income ratio over the past decade.