Skip to contents

Surplus Margin

Source: R/get-surplus-margin-ratio.R
get_surplus_margin_ratio.Rd

Net surplus or deficit as a share of total revenue.

Formula:

sm = revenues_less_expenses / total_revenue

Definitional Range

Bounded above at 1.0 (expenses cannot be negative). Bounded below at negative infinity in theory, but in practice the empirical range for nonprofits is approximately [-0.30, 0.30] in most years. Values below -0.50 or above 0.50 typically reflect unusual one-time events (large gifts, major write-downs, asset sales).

Benchmarks and rules of thumb

  • Near zero: Normal and expected for nonprofits operating close to break-even.

  • 0.02-0.07 (2-7%): Commonly considered a healthy surplus range.

  • Below -0.05 for two or more consecutive years: Common vulnerability threshold (Greenlee & Trussel 2000).

Calculated For: 990 + 990EZ filers.

Usage

get_surplus_margin_ratio( df,
  revenues_less_expenses = "F9_01_EXP_REV_LESS_EXP_CY",
  total_revenue          = c( "F9_08_REV_TOT_TOT", "F9_01_REV_TOT_CY" ),
  winsorize = 0.98 ,
  range     = "np",
  sanitize  = TRUE,
  summarize = FALSE )

Arguments

df

A data.frame containing the fields required for computing the metric.

revenues_less_expenses

Revenues less expenses (net surplus or deficit) for the current year. Accepts one or two column names; if two are provided they are coalesced with the 990 value taking priority over 990EZ.

total_revenue

Total revenue. Accepts one or two column names.

winsorize

The winsorization value (between 0 and 1), defaults to 0.98, which winsorizes at the 1st and 99th percentiles.

range

Character string specifying the theoretical range of the ratio, used to set winsorization bounds. Default "np". Options: "np" (negative to positive), "zp" (zero to positive), "zo" (zero to one), "nz" (negative to zero), or a custom "lo;hi" pair (e.g. "0;10").

sanitize

Logical (default TRUE). If TRUE, NA values in the financial input columns are imputed to zero before the ratio is computed, respecting form scope: Part X and VIII/IX fields (990 only) are imputed only for 990 filers; Part I summary fields (990 + 990EZ) are imputed for all filers. The returned dataframe always contains the original unmodified input columns.

summarize

Logical. If TRUE, prints a summary() of the results and plots density curves for all four output columns (raw, winsorized, z-score, percentile). Defaults to FALSE.

Value

Object of class data.frame: the original dataframe appended with four new columns:

- `surplus_margin`   - surplus margin (raw)
- `surplus_margin_w` - winsorized version
- `surplus_margin_z` - standardized z-score (based on winsorized values)
- `surplus_margin_p` - percentile rank (1-100)

Details

Primary uses and key insights

The surplus margin (also called the operating margin or profit margin) measures what fraction of total revenue remains after all expenses. It is the most direct measure of annual financial performance: positive values indicate a surplus year (more revenue than expenses); negative values indicate a deficit year.

Unlike get_return_assets_ratio() (which scales by assets) or get_return_netassets_ratio() (which scales by equity), the surplus margin scales by revenue - answering the question: "of each dollar raised, how much is left after all expenses?" It is the nonprofit equivalent of the commercial net profit margin.

Formula variations and their sources

Revenues less expenses / total revenue. The numerator uses the Part I summary line (F9_01_EXP_REV_LESS_EXP_CY), which is available on both 990 and 990EZ and may include adjustments not captured in a simple revenue-minus-expenses calculation from Parts VIII and IX. An alternative uses (Part VIII total revenue - Part IX total expenses) / Part VIII revenue, which is more precise for full-990 filers but unavailable for 990EZ filers. The Part I version is used here for maximum coverage.

Canonical citations

  • Tuckman, H.P. & Chang, C.F. (1991). A methodology for measuring the financial vulnerability of charitable nonprofit organizations. Nonprofit and Voluntary Sector Quarterly, 20(4), 445-460.

  • Greenlee, J.S. & Trussel, J.M. (2000). Predicting the financial vulnerability of charitable organizations. Nonprofit Management and Leadership, 11(2), 199-210.

  • Tuckman, H.P. & Chang, C.F. (1992). Nonprofit equity: A behavioral model and its policy implications. Journal of Policy Analysis and Management, 11(1), 76-87.

Variables used:

  • F9_01_EXP_REV_LESS_EXP_CY: Revenues less expenses, current year (revenues_less_expenses)

  • F9_08_REV_TOT_TOT: Total revenue from Part VIII (total_revenue, 990)

  • F9_01_REV_TOT_CY: Total revenue from Part I (total_revenue, 990EZ fallback)

Examples

library( fiscal )
data( dat10k )

d <- get_surplus_margin_ratio( df = dat10k )
#>    :: Total revenue equal to zero :: 200 case(s) replaced with NaN
head( d[ , c( "surplus_margin", "surplus_margin_w", "surplus_margin_z", "surplus_margin_p" ) ] )
#>    surplus_margin surplus_margin_w surplus_margin_z surplus_margin_p
#>             <num>            <num>            <num>            <int>
#> 1:     0.74499464       0.74499464       1.72143244               95
#> 2:     0.06874629       0.06874629      -0.12824002               45
#> 3:     0.07802226       0.07802226      -0.08938044               47
#> 4:     0.10024490       0.10024490       0.01122318               51
#> 5:    -0.16428532      -0.16428532      -1.03670291               16
#> 6:     0.08870931       0.08870931      -0.03837623               49