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Financial Analysis of the American Red Cross
The Red Cross is a nonprofit humanitarian organization that operates in several different countries. The American Red Cross was founded by Clara Barton as an emergency response organization. The Red Cross is one of several worldwide organizations that seek to offer "neutral humanitarian care to the victims of war" (American Red Cross, 2011). In addition, it seeks to help people who have been harmed by natural disasters. The American Red Cross is involved in six primary areas of humanitarian aid: domestic disaster relief, community service for the needy, support for military members and their families, blood and blood product collection and distribution, health and safety educational programs, and international relief and development programs (American Red Cross, 2011). Critically, the American Red Cross is a volunteer organization. 700 locally supported chapters have been responsible for training more than 15 million people for disaster preparedness, and it maintains a crew of more than a half a million volunteers and 35,000 employees to help when disasters strike (American Red Cross, 2011).
The United States is one of the most giving countries, and nonprofit organizations do very well. "The US nonprofit institutions industry includes more than 1.4 million organizations with combined annual revenue of more than $1 trillion... The industry is highly concentrated: nonprofits that make more than $100 million account for less than 1 percent of all firms but earn more than 60 percent of industry revenue" (Hoovers, 2011). In the United States, the American National Red Cross is the second-highest recipient of charitable giving, with 3,700,000,000 in receipts for 2010 (Hoovers, Inc.). Its closest U.S. competitors are Goodwill Industries International, Inc., and the Salvation Army. However, given that the three organizations have different foci, it may be inappropriate to call them competitors.
One would imagine that in an economic downturn, donation-driven nonprofits would experience a significant decline in receipts. However, U.S. corporate profits rose significantly in 2011, which suggests that corporate philanthropic giving will also rise. The demand for nonprofits is to provide social services that the government cannot provide. However, the unique challenge is that nonprofits are not funded by the same people who receive their services. Therefore, the financial challenge…[continue]
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