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Financial Planning: Budgeting For-Profit and Non-Profit

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So your new accountant could practice the budgeting process in your for-profit company, you want her to compare budgeting methods for two different kinds of entities.

You give her information for a for-profit and for a nonprofit entity and ask her to complete the following:

Given the assumptions and data in this Excel file (attached):
complete next year's budgeted figures for each entity within the same Excel worksheet (yellow cells)
include your reasoning for most of the budgeted figures (green cells)
Because of a bad recession, government grants were not cut by 50% but are eliminated completely for next year's budget and fundraising efforts—despite an increase in expenses—did not improve at all.

Explain what you would recommend that the museum manager do.

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Solution Summary

Your tutorial is 354 words and a spreadsheet. The two entities are contrasted and one is found in better shape than the other. Reasons are given for this conclusion.

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The two museums are dramatically different. The for profit museum is growing by 25% in revenues but most of the expenses are fixed so the increase in revenues is mostly adding to profit. The nonprofit museum, by contrast, has non-recurring revenue (grants) unrelated to its patronage that is expensive to replace. I would recommend that the nonprofit increase the ticket prices to provide more support from patrons and less from grants.

For-profit

The for-profit museum is in the enviable position of having substantial growth in patronage ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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