Acting as a financial analyst, what questions would you ask Valley of the Sun United Way’s CFO regarding the changes in the organization’s financial statements over the years? Why is it important that you ask financial questions of the organization?
The financial analysis for a nonprofit organization provides financial statements to calculate financial ratios and circumstance of the agencies.
Four of the financial ratios are the current Ratio, The Long-Term Solvency Ratio, The Contribution Ratio, and The Revenue/Expense Ratio. Each financial ratio demonstrates the risk factor for the nonprofit organization in financial terms and assists with an organizations decision of whether or not to donate money to such an organization. The Current Ratio uses the current assets over the liabilities asset. The purpose of this financial ratio is to assess the liabilities of the organization. The liquidity of an organization is the same as cash. The valley Sun United Way nonprofit organization financial statements combined together for the last two years current ratio show that they have acquired more current assets than current liabilities which may mean that liquidation could be a problem. The Long term Solvency Ratio provides a short term and long term overview of a nonprofits financial statements and includes viewing the total assets over the total liabilities. Potential organization who may want to donate funds to the Valley Sun United Way organization may want to be aware of the time frame the organization pays their annual expenses. The valley Sun United Way organizations total assets over their total liabilities match up to the exact amount for both years. Using the Long Term Solvency ratio as a way to measure the assets and liabilities prove that they are pontional with their payments in regard to annual expenses. Using the combination of the current ratio and the long term solvency ratio demonstrates the financial long range and short range condition of a...
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