Can We Determine Debt To Equity Levels In Non-Profit Organisations? Answer Based On Polish Case
Keywords: equity, debt capital, nonprofit organisations, efficiency of NGO
AbstractCapital structure is an indicator that testifies about the level of financial risk. Nonprofit organisations are an essential part of general social policy in the Polish economy. They realise important aims in healthcare, education and many other socially important areas. Considering efficiency of nonprofit entities should be remembered that from the donor perspective, is important the way the managing team uses resources of the nonprofit organisation and if it is used most effectively. The nonprofit organisation efficiency should be considered in the context of the risk. The one from the most important way to be out of business is the debt to equity relation. In paper are considered relations between debt and efficiency. That relation is also illustrated for Polish nonprofit entities data. Proposal of the paper includes model, which helps to find the optimal level of debt for Polish nonprofit organisations conditions. Novelty of that model is based on full costs of debt financing nonprofit entities in the context of donors expectations, which in Polish social and economic environment means that costs that are not directly linked with realisation of main aim of the social entity, cannot be higher hat 10% of collected money sources.