Dog's Habitat is a dog rehoming shelter where stray dogs can go to find a new family. This organisation is a not-for-profit business which has been successfully operating for five years. In the last three years, Dog's Habitat has seen an increase in the costs of food, toys, and other running costs. The shelter has therefore had to try to reduce the costs associated with its operations and has done this by reducing the number of paid employees that work within each shelter. This has meant that there has been a reduction in the number of hours that the shelter can be open each day. In addition to reducing the number of paid employees, the shelter has started to charge an admission fee for individuals who wish to visit the shelter.

By charging an admission fee, the shelter is able to cover some of the costs associated with the shelter, such as food and toys for the dogs. The shelter also charges an adoption fee for any pet who is adopted and sells food and other accessories for dogs. The financial results of the business from 2018 to 2020 are shown below. Inflation within the country in which Dog's Habitat operates is around 2% per year.

QUESTION

What is the assessment of the financial performance of Dog's Habitat following the information given below and how the current financial performance may impact upon the business within the short term.

Dog's Habitat Financial Results 2018, 2019, and 2020

2018 2019 2020

Revenue from adoptions 25,000 29,250 32,725

Revenue from admissions 2,500 3,300 3,200

Revenue from accessories/food, etc. 5,000 5,500 6,000

Total revenue 32,500 38,050 41,925

Non-staff costs 10,000 12,000 15,500

Wages 15,000 12,000 10,000

Management wages 10,000 10,000 10,000

Total costs 35,000 34,000 35,500

Fee for adoption 50 65 85 Admission fee 1.00 1.50 2.00

Visitors 2500 2200 1600 Adoptions 500 450 385 Hours open per week 32 25 21