Net assets
Net assets are what a nonprofit owns minus what it owes — its accumulated financial cushion, the nonprofit equivalent of equity.
Expressed as months of reserves (net assets ÷ average monthly expenses), it shows how long an organization could operate if revenue stopped. Three to six months is a common target for stability.
Net assets can be unrestricted or restricted by donors for specific purposes; a large endowment can inflate the figure without being freely spendable.
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Related terms
- Endowment — An endowment is a pool of donated funds a nonprofit invests long-term, spending only the investment income while preserving the principal.
- Restricted funds — Restricted funds are donations a nonprofit must spend only on the specific purpose or time period the donor designated.
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