Essay on Analyzing Financial Statements

2021 Words Sep 1st, 2013 9 Pages
Analyzing Financial Statements
HSM/260
August 25, 2013

Analyzing Financial Statements
Calculating Ratios
Current Ratio: 2003 Current ratio= Current assets Current liabilities

Current ratio = 82,058.00 93,975.00

Current ratio = 0.87

Long-term solvency ratio: Long-term solvency ratio = Total assets Total liabilities Long-term solvency ratio = 359,863.00 259,979.00 Long-term solvency ratio = 1.38

Contribution ratio: Contribution ratio = Largest revenue source Total revenues Contribution ratio = 632,889.00
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The organization in 2002, 2003 and 2004 is doing pretty good. There is no question if they are going to be able to pay or not. If the calculations are correct for contribution ratios in years 2002, 2003, and 2004 the organization should be in good standing because in 3 years in a row they generate revenue over 0.5. To the calculations of the program and expenses ratio the organization meets the standard for the 2002, 2003, and 2004. All 3 years are above average percentile at above 0.6. “A private nonprofit human service agency with a general and management/expense ratio greater than .35 should probably start thinking about ways of reducing administrative costs (Martin, 2001, p. 58)”. In 2002 the record shows that the general management and expense was 0.30, in 2003 it was 0.28, and in 2004 it was 0.23 which tell us that there is no need for concerns since it have not passed the 0.35 mark. According to Martin (2001) If the fundraising/expense ratio is greater than 0.15, the human service agency might want to consider changing its approach to fund-raising. According to calculations for 2002 the ratio is 0.10, in 2003 the ratio is 0.06, and in 2004 the ratio is 0.06. Which it show that there is not concern in that area because the ratio is below 0.15. “In the revenue and expense ratio should be at least 1.0 meaning that revenue and expenses are equal”

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