Chapter 10 – Financing the Burden through Debt

The nonprofit has three principal sources of cash: cash from operations, cash from financing activities, and cash from investments. For most entities, debt (cash from financing) is an important source of financing sustainably because it is the principal source of financing long-term projects and capital investments and because the organization cannot produce enough cash from its operations or from its investments to undertake large expenditures; for example, purchasing a building or even buying vehicles or starting up new programs that are not pre-funded. Congregations take out mortgages (debt) to acquire their houses of worship. Government enters into debt to pay for roads, airports, and other capital ...

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