Question

1. Which of the following is a distinguishing characteristic of a nonprofit organization? a. Its revenues do not exceed its expenses b. There is an absence of ownership interests that can be sold, transferred, or redeemed c. It does not depreciate its capital assets d. It does not charge fees for any of its services Answer: B Rationale: Nonprofit organizations, unlike business enterprises, lack ownership interests. Therefore, they do not engage in ownership-type transactions, such as issuing stock and paying dividends. Topic: Operating Environment LO: 1 2. Which of the following activities is performed by state and local governments but not nonprofit organizations? a. Issuing federal tax-exempt debt b. Receiving grants c. Preparing budgets d. Providing services to constituents

Answer 1

Nonprofit organizations are unique in that they do not have ownership interests that can be sold or transferred. They reinvest surplus revenues into the community, in contrast to for-profit enterprises. State and local governments, not nonprofit organizations, have the ability to issue federal tax-exempt debt.

Step-by-step explanation:

Distinguishing Characteristics of Nonprofit Organizations

One distinguishing characteristic of a nonprofit organization is that there is an absence of ownership interests that can be sold, transferred, or redeemed. Unlike for-profit businesses, nonprofit organizations do not have owners or shareholders who profit from the organization's activities. Instead, any surplus revenues after expenses are reinvested back into the organization to further its mission, which could be charitable, educational, or another purpose benefiting the community.

Activities Performed by State and Local Governments

Activities such as issuing federal tax-exempt debt are typically carried out by state and local governments, but not by nonprofit organizations. While nonprofits do engage in various activities such as receiving grants, preparing budgets, and providing services to constituents, the ability to issue tax-exempt debt is reserved for governmental entities. This distinction allows governments to raise funds for public projects at a lower cost due to the tax-exempt status of the debt instruments.