Logit Model for Estimating Non-Profit Organizations’ Financial Status as a Part of Non-Profit Financial Management

Abstract

The non-profit sector plays an important role in the American and European continents, as non-profit organizations support the development of civil society and help people in need. However, most non-profit organizations (NPO) are financially dependent on various donors from the private sector. Nowadays, non-profit organizations focus on improving their non-profit financial management. This research aims to assess the financial status of Slovak non-profit organizations, using binary logistic regression. The initial sample includes 351 Slovak NPOs, which are divided into a training and test sub-sample. The data were obtained from Amadeus, FinStat, the Ministry of Finance of the Slovak Republic, and the Ministry of Interior of the Slovak Republic. The logit model shows that the significant variables are equity ratio, debt ratio, operating margin, and type of NPO using the statistical–analytical program IBM SPSS 25. The model also implies that non-profit organizations should focus on the revenue structure and revenues from the sale of products. The prediction model correctly classifies 97.03% of NPOs in the training sub-sample and 96.61% of NPOs in the test sub-sample. Moreover, more than 70% of vulnerable NPOs are correctly classified.