Which statement about a non-profit's profits is true?

Which statement about a non-profit's profits is true?

• A. They are distributed to shareholders
• B. They are taxed as personal income
• C. They are kept as reserve funds only
• D. They are reinvested into the organization

Answer: (D)

Profits for a nonprofit are used to advance its mission rather than paid out to owners. Since there are no shareholders, there’s no mechanism to distribute profits as dividends. Any surplus is directed back into the organization to fund programs, services, staff, facilities, and future growth. Keeping funds only as reserve money is too narrow because these earnings are meant to sustain and expand the organization’s work, not just sit in a reserve. Also, nonprofit earnings related to the mission are typically not taxed as personal income to individuals, reinforcing that the profits aren’t for personal payout. So, reinvesting the profits into the organization best describes how a nonprofit handles its earnings.

Profits for a nonprofit are used to advance its mission rather than paid out to owners. Since there are no shareholders, there’s no mechanism to distribute profits as dividends. Any surplus is directed back into the organization to fund programs, services, staff, facilities, and future growth. Keeping funds only as reserve money is too narrow because these earnings are meant to sustain and expand the organization’s work, not just sit in a reserve. Also, nonprofit earnings related to the mission are typically not taxed as personal income to individuals, reinforcing that the profits aren’t for personal payout. So, reinvesting the profits into the organization best describes how a nonprofit handles its earnings.