Financial Management for Nonprofit Organizations, 3rd Edition

CHAPTER 2LIQUIDITY MANAGEMENT

1. 2.1 INTRODUCTION
   1. (a) Importance of Liquidity
   2. (b) Are Nonprofits Overly Risk-Averse?
2. 2.2 NONCOMMERCIAL NONPROFIT ORGANIZATIONS
   1. (a) Guidance from Finance Theory
   2. (b) Evaluation of Finance Theory
   3. (c) Complexity of Nonprofit Cash Flows
3. 2.3 EVIDENCE ON LIQUIDITY MANAGEMENT IN THE NONPROFIT SECTOR
   1. (a) Liquidity Management in the Healthcare Sector
   2. (b) Liquidity Management in Colleges and Universities
   3. (c) Liquidity Management in Faith-Based Donative Organizations
4. 2.4 FACETS OF LIQUIDITY MANAGEMENT
   1. (a) Layers of Liquidity
   2. (b) Solvency
   3. (c) Liquidity
   4. (d) Financial Flexibility
5. 2.5 IMPORTANCE OF LIQUIDITY MANAGEMENT
   1. (a) Institutional Factors
   2. (b) Managerial Philosophy Factors
   3. (c) Liquidity Implications of Institutional and Managerial Philosophy Factors
   4. (d) Watchdog Agency Standards on Solvency and Liquidity
   5. (e) Assessment of Watchdog Standards
6. 2.6 WHAT IS THE APPROPRIATE LEVEL OF LIQUIDITY?
   1. (a) Establishing the Liquidity Position Based on Financial Vulnerability
   2. (b) Diagnostic Tools to Assist in Setting the Appropriate Liquidity Target
7. 2.7 CONCLUSION

2.1 INTRODUCTION

We need to set the financial context for nonprofit financial management and for the special importance of liquidity management in the nonprofit sector. In this chapter we make the case for liquidity – ability to pay bills, meet emergency shortfalls, fund growth, and maintain flexibility – as critical to your organization's financial health and financial sustainability. We lay out the ...