rEVENUE & pROFITABILITY |
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Profit Margin
Description:
The profit margin ratio shows the amount of an organization’s revenue that exceeds its cost of doing business. This measure of profitability shows how actively the organization generates or loses revenue.
Impact:
A good profit margin will vary depending on the industry. This range is supported through the purpose of a nonprofit not being to generate a large profit. Instead, nonprofits look to generate just enough revenue to place back in the
organization to continue their services.
Calculation:
[Total Revenue - Total Functional Expenses] / [Total Revenue]
Description:
The profit margin ratio shows the amount of an organization’s revenue that exceeds its cost of doing business. This measure of profitability shows how actively the organization generates or loses revenue.
Impact:
A good profit margin will vary depending on the industry. This range is supported through the purpose of a nonprofit not being to generate a large profit. Instead, nonprofits look to generate just enough revenue to place back in the
organization to continue their services.
Calculation:
[Total Revenue - Total Functional Expenses] / [Total Revenue]
Program Service Revenue
Description:
The program service revenue ratio demonstrates the percentage of program services revenue compared to total revenue. The program service revenue ratio depicts the amount of revenue generated from normally operating programs for nonprofits.
Impact:
This ratio varies by industry but is a good indicator for organizations based primarily around selling the services/products that the nonprofits offer. This source of revenue comes directly from the operation of programs in the organization.
Calculation:
[Program Service Revenue] / [Total Revenue]
Description:
The program service revenue ratio demonstrates the percentage of program services revenue compared to total revenue. The program service revenue ratio depicts the amount of revenue generated from normally operating programs for nonprofits.
Impact:
This ratio varies by industry but is a good indicator for organizations based primarily around selling the services/products that the nonprofits offer. This source of revenue comes directly from the operation of programs in the organization.
Calculation:
[Program Service Revenue] / [Total Revenue]
Contributions Revenue
Description:
The contributions revenue ratio shows the percentage of contributions revenue compared to total revenue.
Impact:
Contributions are a great source of additional funding for organizations and can be a great source to build reserves, allowing for future program expansion and development. Unlike grants or program revenue, contribution revenue is typically not tied to a specific program (unless it is restricted), thus allowing to be diverted towards the actual growth of the organization.
Calculation:
[Total Contributions] /[Total Revenue]
Description:
The contributions revenue ratio shows the percentage of contributions revenue compared to total revenue.
Impact:
Contributions are a great source of additional funding for organizations and can be a great source to build reserves, allowing for future program expansion and development. Unlike grants or program revenue, contribution revenue is typically not tied to a specific program (unless it is restricted), thus allowing to be diverted towards the actual growth of the organization.
Calculation:
[Total Contributions] /[Total Revenue]
Special Events Revenue
Description:
The special events revenue ratio is a measure of what portion of a nonprofit’s revenue during the period comes from its special events. If X is special events revenue, for every $ of total revenue, X is the amount that comes from special events.
Impact:
Special Events revenue represents the money an organization generates through specific events, often with the specific goal of generating funds for the organization. This ratio indicates how much impact this source of revenue has on each industry.
Calculation:
[Special Events Net Income or Loss] /[Total Revenue]
Description:
The special events revenue ratio is a measure of what portion of a nonprofit’s revenue during the period comes from its special events. If X is special events revenue, for every $ of total revenue, X is the amount that comes from special events.
Impact:
Special Events revenue represents the money an organization generates through specific events, often with the specific goal of generating funds for the organization. This ratio indicates how much impact this source of revenue has on each industry.
Calculation:
[Special Events Net Income or Loss] /[Total Revenue]
Investment Revenue
Description:
The investment revenue ratio shows the percent of revenue that comes from investments compared to the total revenue of the company over each year. It is usually good to have some of the non profit’s money invested if they have any savings so that they can maximize their resources.
Impact:
This ratio is an important indicator for organizations reliant on revenue generated through investments. Typically this ratio impacts larger organizations or organizations that receive securities-based gifts.
Calculation:
[Investment Income] /[Total Revenue]
Description:
The investment revenue ratio shows the percent of revenue that comes from investments compared to the total revenue of the company over each year. It is usually good to have some of the non profit’s money invested if they have any savings so that they can maximize their resources.
Impact:
This ratio is an important indicator for organizations reliant on revenue generated through investments. Typically this ratio impacts larger organizations or organizations that receive securities-based gifts.
Calculation:
[Investment Income] /[Total Revenue]