Question

Compare and contrast for-profit and not-for-profit corporate structures based on the information available from a balance sheet and an income statement? Fundamentally, what are the differences?

This is a list of the questions that needed to be answered but needed help with the one above

Why are balance sheets important to healthcare organization finance and what area of the balance sheet would you consider the most critical?

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Compare and contrast for-profit and not-for-profit corporate structures based on the information available from a balance sheet and an income statement? Fundamentally, what are the differences?

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Compare and contrast assets which are the essential economic lifeblood of a healthcare organization's stability. Give detailed examples and explain.

Answer 1

1. Comparison of for-profit and not-for-profit corporate structures based on information available in balance sheet and income statement.

As the name suggests, for-profit organization primarily driven by one objective, that is to maximize profits for their owners. On the other hand not-for-profit organization generally formed for a charitable objective.

• Based on the information available in income statement, non-profit organization want their revenue to be enough to cover the cost of fulfilling their mission for now as well as for future. They often rely on grants and donations in addition to fees from members and others. So, they prepare a statement of activities which lists all revenues less expenses. On the other hand for-profit entities work to maximize their profit and they do not rely on grants or donations. They report statement of profit & loss which emphasizes the sources of revenues and the cost to achieve them as well as their impact on each net asset.
• Based on information available in Balance Sheet; Non-profits entities, which have no owners, prepare a statement of financial position. It also looks at assets, liabilities, and prior earnings. The resulting net assets have been classified as 1) net assets without donor restrictions and 2) net assets with donor restrictions. On the other hand For-profit companies prepare a balance sheet that lists the shareholders’ equity, which is based on the company’s assets, liabilities, and prior profits. The equity determines the value of a company’s common and prefered stocks.

Note: There can be many differences between a for-profit and a not-for-profit organization depending upon the factor of consideration.

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