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Insolvency Propensity in Non-Profit Organisations

Insolvency Propensity in Non-Profit Organisations
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Author(s): Fernando Remondes (Instituto Superior Dom Dinis, Portugal)and Amélia Oliveira Carvalho (ESTG, Politécnico do Porto, Portugal)
Copyright: 2025
Pages: 38
Source title: New Trends for the Governance of Non-Profit Organizations
Source Author(s)/Editor(s): Jorge Remondes (ISCAP, Instituto Politécnico do Porto, Portugal), Fernando Remondes (Instituto Superior Dom Dinis, Portugal)and Vicente Serrano (Miguel Torga Institute, Portugal)
DOI: 10.4018/979-8-3693-3723-3.ch007

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Abstract

Despite their social and non-profit nature, it is important to reflect on the sustainability of third sector organisations and to access data on their financial performance. The aim was therefore to carry out a survey and financial analysis to identify the financial indicators that most determine their propensity to insolvency, using the Altman z-Score model. A quantitative content analysis of the websites was carried out to verify the financial information relating to 102 non-profit organisations. After calculating the dependent variable (Z-Score), the non-linear logarithmic and exponential regression model was explored for each of the years and variables under study. The aim of this statistical procedure was to validate the influence of four indicators, namely indebtedness, financial autonomy, liquidity and dependence on the state, on the propensity to insolvency. The results showed that the use of a set of financial ratios to assess the potential insolvency of non-profit organisations demonstrated the legitimate applicability and significant relevance of the model

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