What is a not-for-profit corporation? What are the major control differences between investor-owned and not-for-profit businesses?
Sandra McCloud, a finance major in her last term of college, is currently scheduling her placement interviews through the university's career resource center. Her list of companies is typical of most finance majors: several commercial banks, a few industrial firms, and one brokerage house. However, she noticed that a representative of a not-for-profit hospital is scheduling interviews next week, and the position--that of financial analyst--appears to be exactly what Sandra has in mind. Sandra wants to sign up for an interview, but she is concerned that she knows nothing about not-for-profit organizations and how they differ from the investor-owned firms that she has learned about in her finance classes. In spite of her worries, Sandra scheduled an appointment with the hospital representative, and she now wants to learn more about not-for-profit businesses before the interview.
To begin the learning process, Sandra drew up the following set of questions. See if you can help her answer them.
First, consider some basic background information concerning the differences between not-for-profit organizations and investor-owned firms.
A not-for-profit corporation is one that is organized and operated solely for religious, charitable, scientific, public safety, literary, or educational purposes. Generally, not-for-profit firms qualify for tax-exempt status. Not-for-profit corporations differ from investor-owned corporations in that they have no shareholders, and hence all residual earnings are retained within the firm. Control of not-for-profit firms rests with a board of trustees composed mainly of community leaders who have no economic interests in the firm.
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