Prediction model as sustainability tool for assessing financial status of non-profit organizations in the Slovak Republic

Abstract

Non-profit organizations (NPOs) play an important role in society. Nowadays, many companies apply the phenomenon—corporate social responsibility (CSR) which supports sustainable development and cooperation between the for-profit and non-profit sector. These companies are careful to cooperate with organizations and make decisions based on many factors, such as financial stability and independence of non-profit organizations. These attributes are assessed by predictive models. The models are a common tool in the for-profit sector compared to the non-profit sector. In our case, the main aim of the research is to propose a prediction model to estimate financial status of Slovak non-profit organizations using discriminant analysis. The overall sample consists of 351 NPOs dividing into training and testing sub-samples. We find that model classifies correctly almost 91% of NPOs in the training sample, respectively less than 80% in the testing sample. However, the results show that all vulnerable NPOs are correctly classified based on the testing sample.