Final Project: Analyzing Financial Statements

Topics: Ratio, Financial ratio, Fundraising Pages: 5 (1443 words) Published: January 11, 2012
Final Project: Analyzing Financial Statements
Calculating Ratios
20032004
Current
$82,058.00$302,902.00
$389,863.00 = 0.21$699,004.00 = 0.43
Long Term Solvency Ratio
$359,863.00$699,004.00
$259,979.00 = 1.38$338,937.00 = 0.62
Contribution Ratio
$632,889.00$1,078,837.00
$1,244,261.00= 0.51$2,191,243.00 = 0.49
Program/Expense Ratio
$945,580.00$1,526,312.00
$1,316,681.00 = 0.72$1,972,131.00 = 0.77
General Management / Expense Ratio
$371,101.00$445,819.00
$1,316,681.00 = 0.28$1,972,131.00 = 0.23
Fund Raising/ Expense Ratio
$632,889.00$1,078,837.00
$1,316,681.00 = 0.48$1,972,131.00 = 0.55

Revenue/ Expense Ratio

$1,244,261.00$2,191,243.00
$1,316,681.00 = 0.94$1,972,131.00 = 1.11

According to Martin,(2001) In terms of interpretation, the current ratio should be at least 1.0, but in general the higher the ratio the better. If the current ratio is less than 1.0, the human service agency may be facing liquidity problems. According to the financial statements of the XYZ Non-profit Corporation, for year 2003 and 2004 Current Ratio is below the average amount available liquidity. This means there is nothing for the organization to liquefy. In reference to Long-term solvency ratio, according to Martin (2001) if the long-term solvency ratio of a human service agency is significantly less than 1.0, the financial viability of the organization may be in question. In year 2003 of the XYZ Non-profit Corporation, there should be no problems as to how payments will be made, but in year 2004, the Corporation is well under budget, which means, there might be problems. If my calculations in the case of Contribution ratios are correct, in year 2003 and 2004, the organization should be in great standing as both years generate revenue over .5. According to calculations of the XYZ Corporation, the Program/Expense Ratio finding is that it meets its standards. Both year 2003 and 2004 are above the average percentile at above .6. In reference to the General Management / Expense Ratios according to Martin (2001), a general and management/expense ratio greater than .35 should be cause for some concern. However, the findings of the XYZ Corporation shows there is no need for concern, because its records indicate a amount of 0.28 for year 2003 and 0.23 for year 2004. Fund-Raising/Expense Ratios of year 2003 and 2004 shows areas of concern for the XYZ Corporation, as its numbers are well above .15, in year 2003 the ratio is 0.48 and year 2004 the ratio is 0.55. According to Martin, (2001) If the fundraising/ expense ratio is greater than .15; the human service agency might want to consider changing its approach to fund-raising.

Now in reference to Revenue/ Expense Ratio of the XYZ Corporation it cannot be determined whether or not the organization has put aside funds for later days or if the organization is not providing as much service or serving as many clients as it could. However, the ratio for year 2003 shows, that maybe there is no cause for concern as the numbers are below 1.0 but in year 2004, the ratio shows an amount above 1.0.

Certain areas does show signs of improvement where as others show signs of concern.

Fixed Cost
2003
$150,000.00 + $24,000.00 = $174,000.00
2004
$150,000.00 + $24,000.00 = $174,000.00
Variable Cost
2003
$1,142,680.77/81,852 = $13.56
2004
$1,797,857.72/141,864 = $12.67
BEP
? I am still confused as to how to calculate.

Budgeting Systems
The purpose of line item budget is to show the difference between finances for the past accounting or budgeting periods estimated for the current and or future periods. One advantage to line item budgeting is it allows the agency to control how funds are allocated. The disadvantages of line item budgeting, according to Martin (2001) line-item budgets say nothing about how much service a human service agency provides, the cost of that service, the...
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