First, consider some basic background information concerning the differences between not-for-profit organizations and investor-owned firms. What are municipal bonds? How do not-for-profit health care businesses access the municipal bond market?

Question

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.

Answer 1

Municipal bonds are bonds issued by state and local governments. The primary difference between municipal bonds and corporate or treasury bonds is that municipal bonds are exempt from federal income taxes and state income taxes in the state of issue.
Not-for-profit health care firms cannot issue municipal bonds directly to investors. Rather, the bonds are issued through some municipal health facilities authority. The authority has no obligation regarding the payment of principal or interest, but acts only as a conduit for the issuing corporation.