CNC Financial Sustainability & Cash Flow Management

Question 1

What is the recommended minimum operating reserve for a nonprofit organization?

Accepted Answer

3–6 months of operating expenses

Answer

1 month of operating expenses

Answer

12 months of operating expenses

Answer

2 years of operating expenses

Question 2

Which type of nonprofit revenue provides the greatest flexibility for long-term financial sustainability?

Accepted Answer

Unrestricted earned income

Answer

Government grants

Answer

Foundation grants

Answer

Restricted donations

Question 3

What does 'revenue diversification' mean in nonprofit financial management?

Accepted Answer

Spreading income across multiple funding sources and types

Answer

Investing surplus funds in multiple stock portfolios

Answer

Offering multiple programs to different target populations

Answer

Filing separate tax returns for each program area

Question 4

A nonprofit's cash flow statement primarily shows:

Accepted Answer

The timing of cash inflows and outflows

Answer

Net asset balances at fiscal year end

Answer

All restricted and unrestricted fund balances

Answer

Total revenue minus total expenses for the period

Question 5

Which financial metric best indicates a nonprofit's ability to meet short-term obligations?

Accepted Answer

Current ratio

Answer

Return on investment

Answer

Debt-to-equity ratio

Answer

Endowment payout rate

Question 6

What is 'bridge financing' in nonprofit financial management?

Accepted Answer

Short-term loans used to cover gaps before expected revenue arrives

Answer

Long-term capital investment for infrastructure projects

Answer

Funds raised specifically for building renovations

Answer

Endowment withdrawals used for day-to-day operations

Question 7

Which approach best helps a nonprofit manage seasonal cash flow fluctuations?

Accepted Answer

Maintaining a line of credit for use during low-cash periods

Answer

Reducing program offerings during low-revenue months

Answer

Deferring all vendor payments until the end of the fiscal year

Answer

Requiring all grants to include a 1:1 matching requirement