Net contribution
Net contribution refers to the difference between the total amount of money that is contributed to a specific cause or organization, and the total amount of money that is spent on expenses related to that cause or organization. In other words, it is the amount of money that is left over after all expenses have been paid. The net contribution can be used to fund further activities or to save for future use.
Net contribution calculation fomula
Net contribution is calculated by subtracting total expenses from total contributions. The formula is:
Net Contribution = Total Contributions - Total Expenses
This calculation is important for organizations, as it helps them determine how much money is available for future activities and programs, or for saving for future use.
For example, if an organization receives $100,000 in total contributions and has $50,000 in total expenses, the net contribution would be $50,000 ($100,000 - $50,000).
Net contribution applications
Net contribution is typically used by non-profit organizations, charities, and other similar organizations to track their financial performance and determine how much money is available for future activities and programs. This information can be used to make important decisions such as:
- Allocating resources: Organizations can use the net contribution to determine how much money is available for different programs, and can allocate resources accordingly.
- Planning for the future: Organizations can use the net contribution to determine how much money is available for future activities and programs, and can plan accordingly.
- Identifying areas for improvement: Organizations can use the net contribution to determine where they may be overspending, and can identify areas where they can improve their financial performance.
- Reporting to stakeholders: Organizations can use the net contribution as a measure of their overall financial performance and share it with their stakeholders such as donors, volunteers, and government agencies.
- Budgeting: Organizations can use the net contribution as a basis for creating a budget for the next year, by allocating funds to different programs and activities according to their needs and priorities.
Net contribution is a key metric for non-profit organizations and is often used to measure their effectiveness in achieving their mission and goals.
Other similar measures
There are several other measures that organizations use to track their financial performance and determine their financial health. Some of these include:
- Gross margin: This is the difference between revenue and cost of goods sold (COGS), and is used to measure the profitability of a business's products or services. It is calculated by subtracting the COGS from revenue.
- Operating margin: This measures the profitability of a business's operations, and is calculated by subtracting operating expenses from revenue.
- Return on assets (ROA): This measures the profitability of a business in relation to its assets, and is calculated by dividing net income by total assets.
- Return on equity (ROE): This measures the profitability of a business in relation to its shareholders' equity, and is calculated by dividing net income by shareholder's equity.
- Current ratio: This measures a business's liquidity, and is calculated by dividing current assets by current liabilities.
- Quick ratio: This measures a business's ability to meet its short-term obligations, and is calculated by dividing current assets minus inventory by current liabilities.
All these measures are important for organizations to track and compare their financial performance over time, and to identify areas where they may need to improve.
| Net contribution — recommended articles |
| Total expenditure — Operating earnings — Operating revenue — Net income — Economic Value Added - EVA — Contribution to sales ratio — Return on investment — Combined Ratio — Accounting period |
References
- Goñi, R., Hilborn, R., Díaz, D., Mallol, S., & Adlerstein, S. (2010). Net contribution of spillover from a marine reserve to fishery catches. Marine Ecology Progress Series, 400, 233-243.
- Exbrayat, J. F., & Williams, M. (2015). Quantifying the net contribution of the historical Amazonian deforestation to climate change. Geophysical Research Letters, 42(8), 2968-2976.
