Reference no: EM133014089
WECARE charity is 'not for profit' organisation which does not have any shareholders. Its main objective is to provide specialised low cost sports equipment to people with disabilities living in East Africa Community to help them participate in a range of sports activities. The charity raises funds through an extensive network of its own charity stores, by individual's donations and by special fundraising events. The stores sell clothing and other goods which have been donated by the public and are largely staffed by volunteers. All of the store premises are leased rather than owned by WECARE charity.
WECARE charity has recently appointed a new Finance Director who previously worked in commercial sector for a large sports equipment retailer. The Finance Director is currently viewing the objectives of WECARE charity and, in order to assist with this process, the Finance Director has compiled the following list of objectives based on a review of the annual reports of various retail companies which supply sports equipment in the 'for profit' sector.
Extract financial and non-financial objectives 'for profit' sports equipment retailers:
Financial Objectives
- Increase earnings per share by 5% a year
- Achieve steady growth in dividends
- Maximum debt to debt plus equity of 50%
Non-Financial Objectives
- High customer satisfaction
- Retain market position in top 3 suppliers
- Reduce carbon foot print
The chair of the Trustees has suggested that the charity considers issuing a $10 million bond in order to finance ambitious expansion of its retail and fundraising operations that have been affected by COVID19 pandemic. The Proceeds of the issue would be used to open a further 100 stores across East Africa. Currently WECARE has 200 stores. The Finance Director has reacted favorably to this proposal and has been quoted in the press as saying 'Charities should be run on commercial lines to maximize social good'
Required
a) Describe the main differences between overall objectives of profit organizations and not for profit organizations.
b) i. Advise on the extent to which each of the financial and non-financial objectives listed above could be adapted for use by WECARE Charity.
ii. Discuss what additional objectives might be appropriate for WECARE charity
iii. Advise whether the proposed bond issue to finance an increase in charity stores is appropriate for charitable organization such as WECARE charity. Include reference to the recent press comment from the Finance Director in your answer.
NB: A report format is not required for this question.